GROWTH
Monday, September 19, 2011 at 5:50PM If you ever stop and think about it for a millisecond, it’s pretty obvious that the notion of perpetual economic growth is a bit daft.
While it’s true I never attended the London School of Economics and I can barely add up, my grasp of the basic laws of physics is good enough to understand that perpetual growth is a load of arse.
And yet that is what our economies are based on. According to the current corporate logic, an organisation, a society, in fact the whole global economy cannot function unless it’s growing. All the time, never ending growth.
I have had people try to explain to me that endless growth is possible, that people have got richer and richer in the last 200 years and this won’t stop.
However, the richness, even if it’s some bozo in an office in the City of London or Wall Street making gazillions, the richness is coming from somewhere. When one guy has twenty billion dollars in the bank, that represents an accumulation of energy and that energy has come from somewhere. Somewhere where it no longer exists. It means that a lot of people are now very very poor.
In the last 10 years in the United Kingdom, the top earners have experienced a 400% increase in their income. The rest of us have experienced diddly squit. Is that growth? I suppose it certainly is for that top 0.0003%.
Growth is an illusion, it’s a myth, it’s based on pseudo maths, on crackpot, frail as gossamer theories that men like to talk about at global economic forums. If one company keeps growing, it’s going to consume more raw materials, it’s going to produce more and make bigger profits. But that company is inhabiting a finite world, the world isn’t growing, the resources aren’t growing but the company is.
There is only one possible long term outcome. It’s going to stop growing at some time and because the entire system it was formed under is based on growth, the only alternative seems to be collapse.
Endless growth or stagnation, contraction, decline. Is that it?
Unsustainable growth or total collapse. Take your pick.
What a shitty choice.
What about stability, what about sustainability? Try and imagine a corporation or nation state who’s economic basis was stability and sustainability. Is it possible.
Imagine Toyota cars, I’m using them as an example because I know the company quite well. Imagine their primary target was to stay the same. They produce the same number of cars this year as they did last year. They introduce new models, they develop new technologies and they maintain their manufacturing base, improve their efficiency and reduce their consumption and waste.
Would this mean they would die out. In the current climate I’ve no doubt it would be the death nell for them, but what if every one of their competitors did the same. Honda, Ford, General Motors, VW. If all those giant companies did the same, stopped getting bigger, refined their products to maximize use of materials and minimize waste, maintain their workforce, develop new technologies and invest in very long term, non growth strategies, would the world survive?
I’m asking this because I love the comments, I learn so much from the comments to things I’ve written. I’m not asking it because I believe non-growth is possible. What I do know is, the system we’re all so locked into now is doomed to failure by its very nature, so we need to do something a little differently. Don’t we?
Reader Comments (14)
Your argument boils down to asking how long is a piece of string. How big should a company be to settle for zero growth? We need small growing companies to replace the declining old big ones. But if everyone agrees to stay as they happen to be right now, how will we replace companies that fail through incompetence?
Robert,
Thanks for this! It gets my mind thinking.
I always wonder where this whole economic growth is taking us... the rich getting richer and the poor, poorer. I work in a part of Vancouver which has all the high-end sports car sales rooms. I see younger and younger people driving away with these super expensive vanity machines. I am assuming their rich parents are buying it for them?
Maybe that's off topic. Perhaps it's just a rant I have questioning why we need these overtly excessive shows up wealth when the world is going down the toilet? Can we not focus on fixing the world around us rather than tickling our gonads with the feeling of "power"? Does it make them feel "powerful" and fulfilled .... as they sit in the long lineups and traffic jams with the rest of "us"?
Do something good for the world instead. Pick one thing and do some good. Put that money into an electric, sporty car. Show off that way. Grow some gonads rather than just buy some shiny chunk of metal and expect it to be your pair.... because you'll end up stepping back out of that shiny car and we'll all see how small they really are.
Sorry if I got way off track!
Yes. We need something other than the continually "growing" economy. But what it is... I sure hope it happens soon so that there's a world for my kids to enjoy in the future rather than just a life of endless drudgery and 9-5.
:-)
otto
OK - a few things. I also didn't go to LSE, but I did study physics at Imperial College so I've some claim to numeracy and understanding of physical reality. I'd also claim some claim some lay knowledge of economics.
First the reasonable stuff in this blog. Yes, physical resource are finite and it is true that no exponential growth trend can go on for ever. Physical resources will eventually be exhausted. Even so-called renewables have their limits (no resource is truly renewable - the universe is going to slow down as entropy builds, but it needn't bother us just yet). One very obvious thing is that the world has a limited carrying capacity - we cannot keep adding to the burden of human population.
Then to the nonsense, which is mostly about economics. The very, very first thing is economics is not, manifestly not, a zero-sum game. If it was, we would all still be back in caves. Economies grow through things like increased production, efficiency and finding better ways of doing things. Note that "things" need not involve physical resources, of which more later. In consequence the idea that, necessarily, some people becoming richer impoverishes somebody else is not universally true. Indeed it can't possible by true, of the existence of just one Russian oligarch would have us all back to primeval soup level.
Secondly, there's the assumption that economic production is inevitably tied up with increased uses of physical resources. Whilst that has been the case, it is less so these days. Much of what is measured in the GDP these days is not directly physical. There are economic activities associated largely with intangibles - with professional services, teaching, films, writing, the media and endless services. Catering services add economic activity, but they don't necessarily use more physical resources than done at home - indeed, in some ways, they can use less.
As for money "sitting in banks", that's a nonsense. Money doesn't, or shouldn't, just sit in banks (stuffing it in the mattress may be a different thing). What happens is that it is borrowed, and used by others. Indeed where would government's be if they couldn't borrow? How would new businesses start if there wasn't investment money or places where it can be borrowed? Money is endlessly re-cycled. Some of it wisely, some of it recklessly. That £20bn is an ephemeral thing - it can disappear. That's the confidence trick - it is sustained only by economic activity, or it becomes worthless as the Weimar republic demonstrated (physical assets are a bit different).
I would go back to the beginning - I do, indeed, think there's a problem with sustainability, but it's about the size of the Earth's population. If we tried to sustain ourselves using stone-aged technology, then we could support a tiny fraction of the people we now have.
As for running an economy on zero growth - well, good luck. I suppose Japan has been doing so for more than a decade, but only at the expense of a simply huge national debt (about 230% of GDP), only possible as people saved for their old age. When that gets drawn upon, then a possible financial catastrophe awaits. Also, try keeping people employed on a zero-growth economy. Try actually making it work - keeping businesses afloat, people in work.
Just about the only places you'll find this are authoritarian regimes. George Orwell knew this. In 1984 Oceania was a state almost defined by its decrepit economy with sclerotic activity. It was kept that way only through ruthless suppression. We have real world examples - North Korea being, perhaps, the best one.
A central, controlling mother-knows-best approach simply cannot work. What can, is if economic factors drive things that way. The various motor companies are producing vehicles which are more efficient and use less energy in their production. They do this because energy is becoming more expensive, because their own costs are going up. Modern cars last far longer than those of my youth - they don't go rusty, they are more reliable. What is driving up demand is the number of people and aspirations, not because cars use more fuel. Indeed it seems economic factors and technology are showing signs of reducing the amount of travelling.
However, if you want to save the world, we'll have to stop having so many babies.
Great post Robert. I've often thought this myself and the lack of growth in Japan over the past 10 years seems to support the idea that we are moving towards stagnation. I highly recommend this video lecture from the physicist Albert Bartlett on doubling time and our inability to understand its implications: http://www.youtube.com/watch?v=F-QA2rkpBSY
The current system of economics is there to enslave 99% of the population into a world full of poverty, injustice, war and suffering and to benifit the remaining 1% (or less) to further keep control over the masses. Before you say it I'm not a 'commie' I'm for human growth, spiritual development, evolution. And so far from what I've seen of this system that runs the world economic growth only hinders the things I stated earlier. It tears our planet apart, drains it of resources, creates wars, creates a divided population, profits from the unfortunate, it distrupts the natural balance of our world, it turns us into obsessive beings who's only interests are accumilating as much 'stuff' as possible before we die. It keep us rapped up in such an individualistic ball that we no longer no how to break free from it. The whole system needs to fall, people need to think for themselves and create a better world (based on peace and harmony). And don't say it ain't possible because it IS. We just have to work at it and not let ourselves be controlled any longer.
Oddly, I've been thinking the same thing today. Not being an economist, I don't see how growth can continue forever without someone losing out. I'm not entirely convinced that growth=progress and progress=growth. e.g. Whenever we invent a labour-saving device we always use it to do more work in the same time rather than less work in the same time, so the utopian dream of a practically labour-free society will remain elusive.
Even if economic growth is achieved through increased efficiency, surely there's a limit to that as well? Just because efficiency has always increased in the past does not mean it will always increase in the future. There must be a point, no matter how far in the future, beyond which the global economy cannot grow. And what happens then?
I've also wondered where growth comes from. If growth is measured in money and, as the economy grows, there is more money - where does that money come from?
It seems that capitalism in its current form relies on growth. But that does not mean it is the only - or best - way to organise an economy. Maybe in the future we will find a way to do without money at all.
naturally indefinite growth in a finite system is impossible. that is a plain fact.
have we reached the limits of groth in our system? definitely not.
the main determining factor is population growth. where will it end, how much is sustainable and are we ready beyond that point. it can be compared to a bacteria population in a petri dish. exponential growth until collapse. mankind is not at a point of evolution to act according to the understanding some have. sorry, most people dont even follow such thought process in the first place.
in the end life as such is possibly not of any importance to the whole "creation"
and it may end up a volatile transitionary state. thank you
Let's say you buy a cup of coffee from Starbucks. Only about 10% of the price you pay will go to cover the cost of physical things like the cup, the coffee, the milk and the electricity used to make it. That leaves about 90% of non-physical economic value, and this is where most of the growth is.
And the non-physical world is quite infinite.
Thought provoking post once again Robert. Not an economist either, but here's my take.
'We' built (or at least allowed to be built) an economic structure based on letting the sheeple think they could improve their lot by getting on the property ladder and making a 'profit' by continually upsizing their house, or by being sucked into the "become a property developer" trap, baited by the media. This need to own your own home was propagated by M.Thatcher (no, NOT Mark) by introducing the right to buy. (This was trumped by selling the sheeple shares in companies they already owned, allowing them to make a quick, small profit, which the corporations that now own all the former national industries and utilities have recouped many times over, and for which we have been, and continue to be fleeced. A master stroke.) Once people were sucked into the property vortex, house prices began to spiral, fed by the banks increasing willingness (and greed) to lend eye-watering amounts of money to just about anyone with a pulse. Whether they could afford to repay it or not. And without either checking or caring.
Since the bubble burst, I've noticed a rising trend to private rental (the houses on both sides of us are let out, but currently vacant). Was this one of the long-term aims of Thatcherism, to return us all to the days of private landlords?
I might be digressing a bit, but the point I'm getting to is that as a nation we 'make' next to sod all (thanks again Maggie), we've put all our eggs in the financial industries (now THERE'S an oxymoron for you), and they've shafted us. Globally. We traded in money that didn't exist, using money that didn't exist, to make a profit that, well, you see the pattern here.
How do we get out of this shitpile? Well, I don't think that cutting public spending to the bone will help. The proportion of people employed by the public sector is massive. If private industry isn't spending ( I'm in engineering, and engineering construction has, as far as I can tell, all but stopped), then putting even more people under the financial cosh is not going to help. If more end up on the dole, that's more people who have to be kept afloat. We need to start making things to get people spending again, to get the flow of real money moving. Otherwise we ARE going to stagnate. then congeal.
I think Steve Jones' response above is pretty good, but I would like to add another dimension.
Economic growth, primarily from the Industrial Age onwards, has been the driving force that has created the living standards we enjoy today, not only in terms of consumer goods but also healthcare, education, communications etc. While we in the West may be experiencing a period of existential angst as a result of the financial crisis, with declining wealth, job losses and public sector cuts affecting all except those at the top, it's important to remember that economic growth is underway and still to come in the developing world and that those people have the right to seek higher living standards too.
We need to be careful that, in our attempt to engineer a zero economic growth model to deal with what are essentially "first world problems", we don't deny others the right to achieve the living standards we enjoy.
Can't argue with Steve Jones' response, even if I guess Imperial College's business department didn't have much to do with it (from my limited experience being taught by them). [btw there's a tl;dr summary at the bottom. Also, fyi, this is really badly written, sorry, I do my best]
I find it interesting, Rob, that you should refer to nature in this, as well as accumulation of energy. I'm going to assume you meant this as a metaphor for Value in the economy as well as literally in the form of energy that we all buy and sell. In the second sense, any biologist (or even any scientist) will tell you that virtually all energy found on earth comes primarily from nuclear fusion in the sun.
I now ask you to think of biological ecosystems on earth as you have our economy. It's essentially the same thing. It started out pretty shitty, but all the time life was taking energy from the sun and other raw materials from the earth and the atmosphere and there you have it: Growth. To begin with this was no big deal; systems are very simple and you just have organisms just living off what they happened to grow on. Then things become more complicated with things competing for survival and eating each other. Here is where we get a cool analogy for added value in stuff: a homo erectus may have contained pretty much the same raw materials as we do, but there's definitely some kind of growth there. It's this kind of growth that matters, and (if it doesn't all go tits up) it will continue somewhat indefinitely in nature as it will in human material/intellectual/civil development.
As for stability of the natural world, it does seem to us to be much more stable than our financial markets, it certainly changes a lot slower (I'm not saying I don't love the world as it is/was/ideally-would-be), but it does operate on a cycle and things do change and huge imbalances occur and catastrophic events do happen in nature too. So while we should try to avoid ruining financial markets, and people who have the power to ruin them shouldn't exist, it does seem inevitable that these things will happen too frequently in such a complex system.
Tl;dr
In spite of this you can't deny that growth has left us with more "value" in our lives, eg. would you want for the world to have stayed the same as it was in the 80s, or even the 90s? This then begs the question of the psychology of it all: although we all appreciate the fact that we no longer live in caves, are we any happier than those who did? IMO we fucking should be.
Thanks for the great post. Needs to be said, much more often. Along similar lines, I found Prosperity Without Growth inspiring
http://www.abc.net.au/rn/bigideas/stories/2010/2943478.htm
One thing we can count on is a pretty staggering population growth and rather than try to claw back the good old days, a lot more effort needs to be going in to figuring out how 100 billion people could live on this planet without stripping its resources and environment.
We can all live more lightly, without sacrificing quality of life. If anything, it will improve quality of life. Cities can actually grow their own food (permaculture). Buildings can be net energy generators (solarcentury).
I'm not an economist :-). However I wish to respond to those who talked about reducing the human population by having less babies.
1. Are there concrete scientifically backed researches which support your point of view?
2. How do you propose to limit the number of babies someone has? Coercion? Penalise once over and agreed limit? Force? [Because these approaches have seriously failed in China].
3. What solution is there for those of genuine religious faith who consider artificial birth control to be anathema?
4. What about people in the third world who do not have guaranteed access to free or cheap contraception?
5. What about men who refuse to use a condom and go fathering children left, right and centre?
6. What about oppressive regimes which will not allow 'us' in to distribute family planning advice?
Mr. Llewellyn:
We'd like to invite you to come speak at our convention next year here in the U.S. How can I contact you about a speaking engagement?
Jack Rickard
http://www.EVTV.me