Friday, August 17, 2012

Growth is for babies: the limits of decoupling on a finite planet

Once we acknowledge that we are living on a sphere with a finite surface, we are faced with a conundrum for traditional economics based on the desirability of economic growth. Historically, economic growth has been associated with all kinds of wonderful things: greater longevity, lower infant mortality, better nutrition, wider horizons, political stability. Some go further and claim that, historically, growing economies have generally correlated with more open, more socially mobile and more democratic societies, while economic decline has been accompanied more often than not by repression and intolerance. Certainly, growth enables questions of distributive justice to be deferred. If everyone is getting better off, then inequalities in the rate of improvement can be ignored.

Yet if we wish economic activity to keep growing, there are planetary limits of just how much stuff we can process and consume. Smart economists quickly point out that an economy is not limited to material consumption. It is possible, they suggest, to decouple economic growth from material consumption such that GDP can still rise while material consumption falls or is stable. Such a goal is the economic holy grail, an absolute necessity if we wish ongoing economic growth. This is absolute decoupling. There is a more modest half-way house, relative decoupling, in which growth in material consumption is slower than GDP growth. The graph below illustrates the point. The x-axis is GDP growth and the y-axis is growth in material consumption. Each dot represents the changes experienced by a nation between 1980 and 2008. Light blue means GDP growth while material consumption declined. Purple means GDP grew faster than material consumption. Yellow means Material consumption grew faster than GDP.
The source is a fascinating SERI report filled with more figures and diagrams than you can poke a stick at. Thanks to Jeremy for the graph and for pointing out the report. Both the report and Jeremy's reflections are worth reading.

Most economies are in relative decoupling. But as long as material consumption continues to rise, planetary limits will inevitably kick in sooner or later. Even those nations that fall into the blue area manage to do so by only a small margin. Perhaps these are but the early days of more ambitious dematerialisation of economic growth. Or perhaps such decoupling is only available to economies that have exported their heavy industries to somewhere else. Since ecological threats are global in extent, no nation is truly an island (despite the conspiracy of cartographers claiming otherwise). Therefore, it is the global economy that needs to decouple, not simply a few richer nations.

First, the rate of decoupling is key. We are already exceeding the ecological capacity of the planet, drawing down on resources faster much faster than they are replenished. Therefore, slowly easing down our demands on ecosystems isn’t going to cut it. The rate of decoupling, according to Tim Jackson's calculations, needs to exceed anything previously accomplished by something like an order of magnitude.

Second, slower consumption will still ultimately exhaust non-renewable resources. Even if we managed to get back below planetary limits for renewable resources like wood or fish, this still leaves non-renewable resources. Reducing reliance on fossil fuels is all well and good, but we've already picked the low-hanging fruit. From here on, the energy, expense and likely damage increase for any further exploitation (as we’re already seeing in deepwater, Arctic and non-conventional drilling operations). Fossil groundwater in much of Saudi Arabia is now basically depleted after just a few decades of intensively irrigated wheat production. Slowing their consumption of wheat per unit of GDP won’t particularly help with this problem, which now means more crops needed elsewhere.

Third, even if we manage to achieve absolute decoupling, even if this is fast enough to get below planetary boundaries before ecological damage is so severe as to prevent further GDP growth and even if we quickly wean ourselves of all non-renewable resources, there is still a yet more fundamental theoretical problem, explained in more detail here. In short: continued growth of population will reach a limit, continued growth of energy will reach a limit (some fascinating details in the discussion here) and so with fixed population and fixed energy but growing GDP, energy will occupy an ever smaller portion of GDP, until it becomes small enough to be arbitrarily cheap – "But if energy became arbitrarily cheap, someone could buy all of it, and suddenly the activities that comprise the economy would grind to a halt."

At some point, the global economy will stop growing. This need not mean that human flourishing ceases or that no further improvements are possible. On the contrary, there are things better than growth. But it is critical that we acknowledge that growth is good for the early stages of an organism but pathological once it reaches maturity.

Growth is for babies (infinite growth is for tumour cells). Let us be grown ups.


Simon said...

You pretty well hit that on the head, nothing to add.

Anonymous said...

Interesting Byron. We have attempted to cover this in our book only in summary I'm afraid due to space limitations.

Its fairly obvious that the current economic system is not set-up for a world in which resources are declining. Chris Goodall has made a study of the UK growth vs use of resources and thinks we may have decoupled growth from use of resource use. I'm not convinced but even if we have we are still using a lot and more than our fair share.


byron smith said...

Herman Daly: Eight fallacies about growth.

byron smith said...

Two new books coming out from CASSE in early 2013:

• "Enough Is Enough" by Dan O’Neill and Rob Dietz
• "Supply Shock" by Brian Czech

byron smith said...

Another one:

The Resilience Imperative: Cooperative Transitions to a Steady-State Economy by Michael Lewis and Pat Conaty.

byron smith said...

The economy is a Pied Piper - a delightful and insightful image from Gillian.

Unknown said...

Some more thoughts on this one: "Germany's post growth movement"

byron smith said...

Thanks - I missed that piece.

byron smith said...

Paul Krugman: Is Growth Over?