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  • Posted February 11th, 2015
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    What to say to people who claim that economic growth can continue forever

    What to say to people who claim that economic growth can continue forever

    Have you ever had an argument with someone who believes that the economy can grow forever? Difficult, isn’t it? What appears completely clear and logical to you seems to confuse them. Here are three articles by true believers in eternal growth:

    Andrew Lilico in the Telegraph

    Tim Worstall in the, er, Telegraph

    Tim Harford on his blog

    We’ll analyse their specific points below, but first, here’s a very simple four-point argument against eternal growth that I think is logically irrefutable. Try it. If it doesn’t work with eternal-growthers that you meet, let me know what their counter-arguments are – I’d like to hear them.

    1. Material growth can’t continue forever. No-one’s going to disagree with this, unless they’re psychotic. The only way to counter this point is if it were possible to invent a recycling process that recycled 100% of materials, without losing any in the process, and without using any energy – and even then, the size of the economy would be limited by the amount of material in the recycling merry-go-round. But that recycling process hasn’t been invented yet – and it never will, because it breaks the laws of physics.
    2. Economic growth always results in an increase in overall spending power. If it doesn’t, then it’s not economic growth, it’s growth, or development, in something else – something intellectual, artistic, spiritual, or maybe a devaluation of the currency – but it’s not economic growth.
    3. It’s not possible to ring-fence that increase in spending power so that it’s never, ever spent on material things. Imagine – if an extra £10 was generated, and I gave it to you for something non-material (I don’t know – telling me a story or something), I’d have to tell you to make sure that you only spent it on services that didn’t involve anything material. That’s hard enough – but you’d also have to say the same thing to the person you gave the £10 to, and make sure that they said it to the next person, and so on, with every transaction involving that £10 – forever. That’s the only way that economic growth could be de-linked from material growth, but…
    4. That’s clearly impossible, and so economic growth will always involve material growth. Therefore, because we’ve already decided that material growth forever is impossible, economic growth forever is also impossible.

    So if our three commentators above believe that the economy can grow eternally, they must disagree with one of those four points. Let’s have a look.

    First, Andrew Lilico:

    ‘there’s no reason why a growing economy must use increasing amounts of resource.’

    He’s trying to wriggle out of point 3, which is only possible if you prevent people from buying second (and then third, fourth and fifth) homes, or more TVs or more flights, or more trendy clothes, or more cars – etc. etc. I understood this point when I watched an interview with footballer Andriy Shevchenko, who had 9 Ferraris. 8 obviously wasn’t enough. When people have more spending power, they buy more stuff. Lilico will have to come up with a way to stop that for his point to make sense.

    ‘We will be able to grow indefinitely if the rate at which we become more efficient at using resources is greater than the rate at which we use them up.’

    This time he doesn’t get past point 1. Let’s imagine an island, 1km in diameter, with 1000 trees, 200 wild pigs, a fresh water spring, fish in the sea, 10 acres of arable land and a certain amount of useful minerals in the ground; and let’s imagine that this island has no access to resources from elsewhere. It’s easy to see that the number of people that this island can support, and the extravagance of their lifestyles, is completely limited by what the island can provide in terms of resources, and what it can absorb in terms of waste. People can’t all have huge palaces involving thousands of tons of stone, and hundreds of trees, let alone more than one of them. No amount of ‘efficiency’ or voodoo economics can change that, and neither can a democratic vote or any kind of techno-fix. Materially, the island economy can’t grow past a certain point. The island itself dictates the size of the economy – and it’s exactly the same for the planet.

    ‘there is the Sun, which – directly or indirectly – provides almost all of our energy. (Now, it’s true that the Sun will eventually die but not for another five billion years. So, for the purposes of my argument, it’s limitless.)’

    Great, let’s limit ourselves to the energy provided by sunlight falling on the earth. In other words, let’s rely on what nature provides by way of renewable resources on this planet, without depleting them. That’s going to require a stable economy, not a constantly growing one.

    ‘There is also the possibility of accessing resources from other planets.’

    Good grief. We haven’t worked out a way to live that ensures our survival on this planet yet, and he wants to mine other planets. But in essence, I agree with him. There may come a time, when we’ve worked out how to live sustainably on this planet, without damaging ecology in the way that we are currently, that we can harness solar power to travel to other planets to bring back resources. We’re a long way from that at the moment – and our priority has to be to stop the destruction of the ecology of our home planet. Attempting to colonise other parts of the solar system (I’m assuming that Lilico isn’t crazy enough to suggest we try to colonise other solar systems at this point) will accelerate resource use and waste, and make it more difficult for us to stop destroying ecology.

    Now Tim Worstall:

    ‘The basic idiocy starts with the observation that there isn’t an infinite amount of stuff out of which we can make stuff. This is obviously true and no one asserts differently. However, it’s entirely possible to have a system which is finite in one dimension, and this will not limit growth within that system in another, entirely different, direction.’

    That’s a bit rude. Let’s see if we can see where the idiocy really is. He understands point 1. Material growth can’t continue forever. But then he goes on to show that he doesn’t get point 3. It’s not possible to ring-fence the additional spending power that economic growth brings so that it’s not spent on material things.

    ‘as long as technology keeps advancing then we can continue to add more value and thus we can continue to have more economic growth.’

    No, he still shows no sign of understanding point 3.

    ‘To be silly about it, we’ve got 1 million tonnes of copper and that’s it. We use that copper to make paperweights. Then we learn how to make copper into computer motherboards and we recycle all paperweights into computers. We value the computers more than the paperweights: we’ve just had GDP growth, we’ve just had economic growth, with no increase in the consumption of resources.’

    He’s right about one thing – that is silly, because: a) recycling always loses material and requires energy, plus we have a limited amount of material to recycle – therefore the recycling merry-go-round has a limited size and lifespan; b) once the copper paperweights have been turned into motherboards, we’re going to need to make more paperweights from something else; and c) he still doesn’t see that the increased spending power generated by growth can’t be ring-fenced so that it isn’t spent on more an more material things – which is exactly what the advertising industry is persuading us all to do.

    ‘…set up a committee of people to study which resources are constrained. We can then charge people higher prices for trying to use them: this will encourage them to either use other, unconstrained, resources or to figure out ways to achieve the same goals with fewer of our limited resources. …we’ve already got that committee and that method of charging higher prices. It’s called ‘the market”

    And we’ve had growth-oriented market economies (albeit corporate-controlled rather than ‘free’) in the West for over 200 years – hands up anyone who thinks they’ve solved the problem of resource depletion, waste and ecological damage, or are likely to in future? This insane utopian experiment is making the problem worse every day.

    Now Harford.

    ‘GDP merely measures what people are willing to pay for, which is not necessarily connected to the use of energy, or any other physical resource.’

    This is becoming tedious. Again, point 3. This only works if you can stop people using their increased spending power to buy more material things. And as the global advertising industry exists to persuade people to do just that, with banks prepared to allow people to get into debt to do it, that’s looking really unlikely.

    ‘Would you like to take a guess at energy growth per person in the United States over the last quarter of a century? It’s not just less than 2.3 percent. It’s less than zero.’

    Unless Harford is really stupid, this is completely dishonest. Manufacturing in the West has been decimated – exported to the Far East in fact, which is the reason energy consumption has fallen. Also, he must also know that the energy required to transport goods that are now manufactured elsewhere to the West isn’t included in national figures, and neither is the energy used to fly Westerners around the world – which has increased massively.

    Of the three, Harford’s effort is the weakest. But the one thing that none of these three understand is ecology – and why should they? Economics as a discipline completely ignores it, even though economics is a subset of ecology. Our absurd and pointless quest for eternal growth is damaging the ecology we need to survive. It’s difficult to think of anything stupider.

    So – why does the Telegraph seem so keen on promoting the idea of eternal growth? Maybe because the Telegraph is a corporate newspaper. They understand that growth is an integral part of corporate capitalism – take it out and you take away their power. So they get tame, naive economists to spout the nonsensical idea that growth can continue forever. I can only appeal to right-wing economists like Worstall, Harford and Lilico – stabilising the economy doesn’t mean taking away your beloved free market. In fact, corporate capitalism prevents the free market. Let it go.

    But socialists believe in the mantra of eternal growth too, and the rapid growth of communist economies was responsible for more ecological damage than capitalism in the twentieth century if anything. They’re two sides of the same coin. Let’s start talking about a new economic system – neither communist nor capitalist – neither planned nor based on fractional reserve banking, gambling and debt.


    The views expressed in our blog are those of the author and not necessarily lowimpact.org's


    12 Comments

    • 1Philip February 20th, 2015

      Dave
      I am not sure why recycling defies the laws of physics. The earth is not a closed energy system since it receives power from the sun.
      It is not true either that economics disregards ecology. There is a very mature environmental economics discipline that is based around the analysis of ecosystem benefits and the services we derive from them. This is not just about the consumption of natural resources but also includes things like existence values – we don’t need to consume a resource in order to derive a benefit or service from it.
      I think the bigger problem with capitalism is the inequality and social problems that it causes. As far as environmental impacts are concerned, if the problem is loss of natural capital then that is what we need to focus on. Tilting at economic growth is bound to fail, whether you think it is a good thing or not, and for most people would appear to be an attack on their own livelihoods. Focussing on those forms of economic activity which are unsustainable is a more practical option.
      Philip

    • 2Dave Darby February 20th, 2015

      Hi Philip,
      Thanks for the comment.
      I didn’t say that recycling defies the laws of physics, I said that recycling that doesn’t lose any material in the process and doesn’t use any energy defies the laws of physics.
      The earth receives a finite amount of energy from the sun, and provides a finite amount of resources and a finite capacity to absorb waste.
      Putting a price on ecology doesn’t stop it being destroyed, it just removes access to it for poor people.

      But the most important point – you say: ‘This is not just about the consumption of natural resources but also includes things like existence values – we don’t need to consume a resource in order to derive a benefit or service from it.’

      Do you see how that doesn’t address my points 2 and 3 above? If spending power increases (which is inevitable if the economy grows), then there’s no way to prevent people using that extra spending power to buy material things. How would you stop the Shevchenkos of this world buying 9 Ferraris – and more?

      I agree that capitalism also concentrates wealth and impoverishes people, but our economy is destroying ecology, and it’s ecology that keeps us alive. Tilting at economic growth might fail, you’re right, but if it does fail, then nothing else we do will stop the mass extinction event that we’re in. We can’t address loss of natural capital without addressing economic growth. That would be like trying to save the Titanic without steering away from the iceberg.

    • 3maggie2watson March 30th, 2015

      Im on the side of Prosperity without Growth, and advocate just that, but I would still refute some of those rather closed arguments. Every extra trip to the hairdresser is additional GDP (which is why it is not a great metric). Every repair of a flood damaged building, every trip to watch a comedian. Some of these use raw materials, others don’t. Computers in the wartime used a huge amount of raw material for piddly computational results. Look now – huge power for a tiny resource use (per computer). Silicon is all but inexhaustible. So your finite island can produce a lot more by improving how and what it produces, down to software engineers that allow us on virtual trips rather than flying across the world trips. The main questions is what do we gain from eternal economic growth? It certainly isn’t a better life, and surely that is what we need to strive for. Time for people. Time for family. Time for fun. We have enough at least in the rich world. More stuff does not improve our lot unless the guy next door has much more and we get envious.

    • 4Dave Darby March 30th, 2015

      ‘Every extra trip to the hairdresser is additional GDP (which is why it is not a great metric). Every repair of a flood damaged building, every trip to watch a comedian. Some of these use raw materials, others don’t.’
      I think they all do. There aren’t any hairdressers that don’t use water, electricity etc.
      But that’s not the main point. Increase in GDP means more spending power for everyone, including hairdressers, and that spending power can absolutely not be ring-fenced so that it’s not spent on material things. So perpetual economic growth = perpetual growth in spending power = perpetual growth in material things (Shevchenko and his 9 Ferraris), which isn’t possible.

      D

    • 5Dave Darby March 30th, 2015

      Also, Jevons paradox – http://en.wikipedia.org/wiki/Jevons_paradox. Check the link, but basically, any technological improvement that increases the efficiency of the use of a particular resource, will increase the use of that resource, because it becomes more financially and technologically viable to use it. The classic example is James Watt’s steam engine. It was invented to reduce the use of coal, because it did the same work as the Newcomen engine with a fraction of the amount of coal. But of course, after the invention of the steam engine, coal use exploded because everybody started using steam engines.
      In your example, sure, the amount of resources per computer has fallen, which according to your theory should mean that the computing industry uses fewer resources and creates less waste. According to the Jevons paradox it should mean that the computing industry booms and causes a massive increase in total resource use and waste. And it’s obvious that Jevons (long dead) is right.
      Your idea only works in a stable economy, not a growing one.

      Completely agreed with the rest of your post btw.

    • 6Stewart April 7th, 2015

      Knowledge is key

    • 7Michael mcgeoghan September 6th, 2016

      The only indestructible store of value anyone possesses regardless, is knowledge. Is knowledge infinite or finite? You can attain knowledge without consumption. Knowledge is value in itself and can create growth. I think growth is infinite only if knowledgr, human capital is finite.

    • 8Michael mcgeoghan September 6th, 2016

      I suppose then you would argue your points 2 and 3 again….those with the knowledge cannot spend the value they create on material things.

    • 9Dave Darby September 6th, 2016

      Yeah, knowledge accumulation is fine, but growth in knowledge is not economic growth. Economic growth involves an increase in spending power, and regardless of how much knowledge we’ve accumulated, we’re still left with the problem of how to ring-fence the increase in spending power so that it’s not spent on material things, and as far as I can see, that’s impossible.

    • 10Dave Smith September 28th, 2016

      Dave I think what the economists are trying to get through to you is that if things get too expensive, people will stop having kids. That will be your massive “extinction” event.

      Trouble is, what they’re also trying to get through to you is that the reason why a lot of things aren’t getting expensive enough to stop people from having kids is that we’re clever enough to substitute one scarce resource for another, and to do clever things with them.

      That’s what growth is all about.

      As for the ecological disasters and tragedy of the commons scenarios, well if there’s no fish left, people stop fishing for it because it’s too expensive to make a living. And all of a sudden we’re back at the first point again! Amazing isn’t it.

    • 11Dave Darby September 28th, 2016

      I never mentioned tragedy of the commons. The commons don’t cause tragedy if they’re managed and organised. Only a free-for-all commons where no-one communicates cause tragedy.

      Do you know much about ecology, and what peer-reviewed ecologists are saying is happening to it?

      Happy to debate if you engage with my points (which is why I put them in the article, after all).

      First, do you see that material growth can’t continue forever – that there’s a limit to the number of settees, fridges, cars, thimbles or anything material that we can have in the world?

    • 12Aram September 14th, 2020

      Hi Dave,

      Thanks for writing this.

      Can you elaborate on “Economic growth always results in an increase in overall spending power”? I don’t understand why that necessarily follows and the distinction you are making with development.

      Also, discussions around infinity are highly theoretical. While we’re at it, wouldn’t it be possible for us to live in a society with a different cconscience. That is, where our basic needs are met (and we only pay for knowledge products) ? e.g. drama classes, algorithms, etc.

      Knowledge products which are

      A) infinitely compressable in the manner required to represent/transmit them? So for instance, we can subsume newtonian motion with einsteinian theories. We can represent the number 5 with 5 fingers or with 2 symbols (1 and 0 binary). The knowledge product is achieving more with less.

      B) composed of the same resources as other products but configured differently in a
      subjectively better way (e. g. tearing down a house and re-building it out of the same materials. The net value (growth) is in the design not the materials)

      In this scenario, the bedrock constraint to growth is time not material/energy resource.

      Please let me know if you find issues with this reasoning.

    • 13Dave Darby September 14th, 2020

      Hi Aram

      “Can you elaborate on “Economic growth always results in an increase in overall spending power”? I don’t understand why that necessarily follows and the distinction you are making with development.”

      – GDP is a measurement of the output of goods and services – if output rises, it can only be purchased with additional spending power. If there’s no additional spending power, it can’t be sold, and the economy won’t grow. It’s quantitative (‘development’ can be qualitative, but GDP can’t). As the Bank of England says – “When GDP goes up, the economy is growing – people are spending more” – https://www.bankofengland.co.uk/knowledgebank/what-is-gdp

      “discussions around infinity are highly theoretical”

      – sure, but the ecological damage that trying to grow the economy infinitely isn’t.

      “While we’re at it, wouldn’t it be possible for us to live in a society with a different cconscience.”

      – it’s possible in theory, but only if a) you think that the link between wealth and power can be severed within capitalism, or b) we can replace capitalism with a system that doesn’t concentrate wealth. I think that a) is impossible, and b) highly unlikely, so I think we’re in deep trouble (although I’ll keep working on b).

      “where our basic needs are met (and we only pay for knowledge products) ? e.g. drama classes, algorithms, etc. ……..”

      Again, it might be possible in theory, but in the real world, material resource use is growing every year (maybe not this year, for obvious reasons – but the business world and virtually all politicians are gagging for us to ‘get back to normal’ – i.e. normal levels of destruction).

      Also, look at a group of people who have suddenly found themselves with much higher spending power – professional footballers. Where are the mechanisms to stop them buying enormous second homes, fleets of cars, wardrobes full of designer clothes, overseas holidays etc? What percentage of the population wouldn’t spend more on material things in receipt of higher income? And how would you stop them?

      WWF are now telling us that there’s been a 68% fall in populations of all wildlife, globally, in the last 50 years. This fall is because of the human economy – nothing else. Why anyone would want to keep trying to grow that human economy under those circumstances, without questioning whether that might just be a suicidal path is beyond me.

    • 14Aram September 15th, 2020

      Hi Dave,

      Thanks for the clarification. I agree with almost everything you’ve said and — in particular — your distinction between in theory and in practice.
      I do think knowledge is increasingly dominating growth and so its not too implausible to extrapolate the trend; look how much we pay consultants and programmers. They certainly have an ecological footprint both through their labour (food, electricity, etc) and their recreation (using their salaries to fly around the world) but overall I think there is a trend to increasingly value lower-material-impact commodities: e.g., computers and phones are lasting longer and longer and people are paying for software (knowledge) rather than new hardware.

      The relationship you described between growth and spending power I think is a primary “contradiction of capitalism”, noted by Marx (i.e., the capitalist accumulation process restricts the purchasing power of the masses, leading to an eventual collapse). But its interesting that in your article you say that socialists also have faith in infinite growth. The contradiction you’ve note, however, is ecological rather than about labour-relations.

      The link you shared on growth says that government spending is also included in growth measures by the UK. Doesn’t that provide a mechanism for the ring-fence you posited? i.e., a situation where you have economic growth where only the government experiences an increase in spending power? This spending power could then be used on non-material things. Again, this is unlikely and requires a more socialism-oriented public but certainly not impossible

      I think most people are obsessed with growth because they incorrectly believe the gains are socialized and trickle down; in terms of income this has been shown to be false, but in terms of employment? unclear. Is there a relationship between high growth and employment?

      Thanks again; keep up the good work!

    • 15Dave Darby September 15th, 2020

      Thanks Aram

      Sure – the knowledge sector is growing, but so is aviation and cargo ships, for example, and many other resource-hungry industries. If we’re going to prevent runaway climate change, we have to keep those fossil fuels in the ground (and it doesn’t look as though we will). People are going to want more than knowledge – they’re going to want flights, cars, fashionable clothes, gadgets, and even knowledge requires an ever-increasing amount of energy to deliver it.
      Marx’s capital accumulation conundrum hasn’t kicked in so far – more and more flights and ships every year (except this one, but they can’t wait to get back to normal) – but even if it starts to, they have tricks up their sleeve (UBI etc.). I wonder where it will eventually stop, if left unchallenged? Corporates keep increasing market share whilst laying off workers. I guess the logical conclusion is that Amazon, Google and a few more will produce everything, with AI, robots and no human workers at all, their majority shareholders will accumulate all the world’s wealth, and the rest of us will depend on UBI and any other way we can scrape a few pennies (ah, but I guess that won’t be allowed, as there won’t be cash, and they can track our income and purchases electronically).
      (I don’t want to leave that situation unchallenged though.)

      “I think most people are obsessed with growth because they incorrectly believe the gains are socialized and trickle down”

      – I think you’re right – or they believe that the alternative is recession and depression (but that’s unplanned shrinkage, not planned stabilisation).

      “Is there a relationship between high growth and employment?”

      – yes, but it’s unsustainable. In the same way, there was a relationship between resource use and the power of the Roman Empire, until the resources were overexploited and had to be brought from ever-further afield, leaving them vulnerable; or even more bluntly, there was a relationship between fuel burnt and distance travelled on the Titanic. Everything looked good until right at the end.

      We can see the iceberg now – it’s really clear.

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