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

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Posted Feb 11 2015 by Dave Darby of Lowimpact.org
hamster Image from http://www.impossiblehamster.org/, by the New Economics Foundation.

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.