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1 The growth machine

The unquestioning devotion to the idea of constant economic growth is a fairly recent phenomenon in human history. But it has taken firm hold despite the numerous great thinkers who have pointed out what should be clear to all – that in a world of finite resources, exponential growth is not only unsustainable but also extremely dangerous.

‘The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.’

John Maynard Keynes

The eminent British biologist Charles Darwin was a careful scientist – meticulous, patient and rigorous. He spent five years at sea on a research ship, The Beagle, collecting data, then nearly 20 years sifting his research, honing his analysis and polishing his prose, before publishing On the Origin of Species, his groundbreaking work, in November 1859.¹

Darwin’s slim volume was what we would call a ‘game changer’; a revolutionary work that irrevocably and fundamentally altered the way human beings see themselves and the natural world. Today, most of us are familiar in a general way with his theory of ‘natural selection’ – the foundation of modern evolutionary biology. But 150 years ago, things weren’t so clear-cut. Darwin was sailing into choppy waters. The Church of England set rigid boundaries on scientific thought and his thesis was clearly offside – a challenge to the orthodox Biblical view that humans were a separate, unique part of God’s creation and that all life was divinely concocted and unchangeable. The establishment mocked him. There was intense public debate. But Darwin stood his ground and eventually, with the support of Thomas Huxley (aka ‘Darwin’s bulldog’) and others, his radical insights found acceptance.

Darwin’s core idea that all animals and plants evolve and adapt through natural selection is now the bedrock of modern life sciences. He unlocked the door to a new way of understanding the history of life on Earth – although ‘junk science’ theorists, religious fundamentalists and ‘intelligent design’ proponents are still trying to slam it shut.

History of an idea

For most of human history, economic growth was a mere blip. Societies developed slowly, economies were founded on subsistence and growth was minimal. Only the last eight generations of humans have experienced consistent growth (out of an estimated 125,000 generations in total). ‘Historically, steady state is the normal condition; growth is an aberration.’²

The modern idea of growth is a product of the 17th- and 18th-century European Enlightenment that challenged traditional views of religion and humankind’s place in the cosmos. Thinkers like John Locke in England, David Hume in Scotland, Voltaire in France and Thomas Paine in the US mapped out this new intellectual terrain.

This rupture with tradition changed age-old cyclical thinking to sequential thinking, unleashed democratic political movements and ushered in the rule of law. The idea of progress became paramount: the notion that history has a direction, which is the gradual improvement of the human condition. The rise of science and the empirical method merged with improved technologies (the steam engine, gunpowder, the printing press), stimulating early capitalism. Economic growth became synonymous with social progress, development and human improvement. European colonialism then spread the ‘growth equals progress’ idea around the world.

But it wasn’t until the Second World War that our modern understanding of growth began to enter the consciousness of governments and international agencies. According to one scholar, ‘there is hardly a trace of interest in economic growth as a policy objective in the official or professional literature of Western countries before 1950’. Pumping up the war machine proved that growth could be rapid, if necessary, and pointed the way to future expansion. In 1943 the US National Resources Planning Board reported to President Roosevelt: ‘Our expanding economy is likely to surpass the wildest estimates of a few years back and is capable of bringing to all of our people freedom, security and adventure in richer measure than ever before in history.’³ Less than two decades later, the future US President Ronald Reagan summed up this view during his stint as host of a hugely popular 1950s TV drama programme sponsored by General Electric. Every Sunday night a young, rock-jawed Reagan confidently told American viewers: ‘Progress is our most important product.’

In his 1978 book, The Rise and Fall of Economic Growth, HW Arndt adds that a statement by the US Council of Economic Advisors in October 1949 ‘was perhaps the first explicit official pronouncement in favour of economic growth as a policy objective in any Western country’. With the arrival of the ‘Cold War’ in the 1950s and growing tensions between the Soviet Union and the West the notion of growth took on another dimension. Increasing per-capita GDP was trumpeted as a measure of who was winning the battle between two contending economic systems. Within a few decades, growth became the ultimate metric of progress and economic health around the world. As Arndt notes, the case for economic growth was based on the belief that steady, rapid and indefinitely increasing productive capacity was the key to higher living standards, which were both ‘desirable and demanded’ by the citizenry of the world.

This slavish devotion to growth economics still dominates the mindset of governments, mainstream economists and their uncritical boosters in the media, trade unions, big business and academia. All major power groups in society now assume that a growing economy is the sine qua non of social progress. As long as a rising tide lifts all boats, it’s full steam ahead and we can avoid hard choices.

As the former World Bank Chief Economist and ex-president of Harvard University, Lawrence Summers, put it: ‘We cannot and will not accept a “speed limit” on American economic growth. It is the task of economic policy to grow the economy as rapidly, sustainably and inclusively as possible.’⁴

Adapted from Peter A Victor, Managing without growth, Edward Elgar, 2008.

Darwin’s long battle has disturbing echoes today. Like his detractors in Victorian England, we are also mired in an illusion that blocks our understanding of critical forces at work in the world. But the myth that envelops us – our blind faith in limitless economic growth – is more dangerous and even more deeply rooted.

We have abiding faith that the economy will grow forever, that there are no limits to the wealth we can create from the natural resources of this bountiful planet. Our financial systems are premised on growth; government policies are based on growth; corporate profits, jobs and incomes are hitched to growth.

Growth equals prosperity. The equation has been drummed into us for so long that it has become received wisdom. Growth brings employment, wealth, material and social progress, happiness and stability. Growth is the key to combating poverty. It makes the world a better place.

Indeed, an unwavering belief in progress is the quintessential modern idea. History is linear. Science, technology, democratic governance and liberal humanism greased by native ingenuity, will lead to the improvement of the human species. And economic growth is the vehicle for arriving at that destination.

Loosening bolts in the growth engine

But lately the bolts have begun to loosen in the growth engine. The global environment is under severe stress and has already been irreparably damaged. In 2005 the UN Millennium Ecosystem Assessment, a collaborative work of more than 10,000 scientists, found 60 per cent of ‘ecosystem services’ – things like climate regulation, the water cycle, pollination, global fisheries, natural waste treatment – were degraded or being used unsustainably.

‘Human activity is putting such a heavy strain on the natural functions of the Earth,’ the report warned, ‘that the ability of the planet’s ecosystems to sustain human endeavor can no longer be taken for granted.’

But discounting the environment is only part of the problem – and one that we will explore in depth in a later chapter. There are also a growing number of thinkers who are beginning to challenge the status quo in fundamental ways by asking hard questions.

What if the emperor has no clothes? What if endless economic growth is a chimera that causes more problems that it solves?

Many ecologists believe we have entered an era of ‘uneconomic growth’ where more fevered economic activity actually depresses living standards and levels of happiness. It doesn’t take much of a stretch to see what they mean. We can have a booming economy alongside growing inequality and fewer jobs – i.e. jobless growth. We can have shopping malls full of digital gadgets and showrooms replete with bigger, shinier automobiles – but how much better off are we if we spend three hours a day in traffic jams, worry over bigger debts and have less time for ourselves and our families? The volume and pace of growth tell us nothing about the quality of growth. And shouldn’t that be our main concern?

But before we get too caught up in the downside of growth, let’s backtrack for a moment to answer some basic questions. What exactly do we mean by economic growth? How does it work and why has it become so central to our lives?

Today, the standard measure of growth is Gross Domestic Product or GDP – the total value of all goods and services produced in a country within a given period. It’s usually calculated over the course of a year. GDP as a measure of growth is now so entwined in our lives that it’s barely given a second thought. It’s one of those things that most people don’t question: more is good; less is bad. You only need to peruse the avalanche of daily media reports to validate this assumption. Here’s an edited snippet from a recent news report that gives you an idea of how commonplace the language of growth/GDP has become.

Global outlook turns darker

…Calling the risks of a worldwide slump “alarmingly high” as it warned of decelerating economies, the IMF puts the odds of global growth falling below 2 per cent – effectively a recession – at one-in-six.

At that rate of growth, the global economy is too weak to keep up with population growth.

‘A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component,’ the IMF said in its ‘World Economic Outlook’, released in advance of the annual World Bank-IMF meeting in Tokyo…

The IMF sliced its global growth forecast to 3.3 per cent this year from 3.5 per cent in its previous reading in July, which would mark the slowest expansion since 2009, when the world was emerging from the deepest slump since the Great Depression.

The influential agency has also reduced its projected growth in 2013 to 3.6 per cent from 3.9 per cent just three months ago and 4.1 per cent in April. But it warned ominously that even the lower projection for 2012 and beyond ‘depends on whether European and US policy-makers deal pro-actively with their major short-term economic challenges.’5

This typical press report underscores a key concern: without GDP growth the global economy 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 cleric, pondered the question of exponential population growth in relation to available resources and food supply. Malthus feared that global population would increase faster than the earth could support and that this inevitable trajectory would lead to widespread famine and disease.

‘Must it not then be acknowledged by an attentive examiner of the histories of mankind,’ Malthus wrote, ‘that in every age and in every State in which man has existed, or does now exist, that the increase of population is necessarily limited by the means of subsistence… and the actual population kept equal to the means of subsistence, by misery and vice.’

Malthus’s gloomy vision was out of step with the upbeat enlightenment values of 18th- and 19th-century Europe. And, as it turned out, he misjudged the impact of science and technology on food production. The introduction of mechanized farming, combined with the spread of oil-based fertilizers and pesticides, increased harvests beyond imagination. Malthus also failed to take into account the link between falling birth rates and improved living standards. As industrialized societies became wealthier and women gained some measure of economic independence, birth rates leveled off dramatically.

Around 2,000 years ago, with the Roman Empire and the Han dynasty in China at their peaks, there were 300 million humans spread around the globe. By the time Malthus was penning his population thesis 1,800 years later there were thought to be around a billion people on the planet. By 1950, a century and a half later, that number had increased to 2.5 billion. Then the exponential growth factor really began to kick in: by 2005, just 55 years later, there were 6.5 billion people, an increase of 160 per cent. The UN now says we’re on target to reach 9 billion by 2050.

But it’s by no means a sure thing. A lot depends on the variable that Malthus missed, what demographers call the ‘fertility rate’ or the number of children a woman will have during her lifetime. Already the fertility rate is below replacement level in more than 75 countries, which means that populations are falling in those nations before migration is taken into account. Why? Well, the answer is not straightforward but it appears there is a clear link between a falling fertility rate and women’s empowerment. The more economic power and the more education that women have, the more likely they are to choose to have fewer children. The UN projects future population numbers using low, medium and high fertility forecasts. With a low fertility rate (entirely feasible given current trends) the agency predicts a leveling off and then decline in world population. Numbers will peak in 2050 at 8 billion, then start to gradually decline so that by 2100 we will be back to where we were in 1998 with around 6 billion people.

But Malthus wasn’t the only growth skeptic. The classical economist and philosopher John Stuart Mill reckoned that a growing economy was necessary up to a point but that eventually a ‘stationary state’ would be needed to replace the ‘trampling, crushing, elbowing and treading on each other’s heels’ that characterized the rough-and-tumble nastiness of Dickensian Britain.

Mill was an economist but his interests ranged widely over philosophy and political economy. He was concerned with big issues and fundamental questions:

‘Towards what ultimate point is society tending by its industrial progress? When the progress ceases, in what condition are we to expect that it will leave mankind… It must always have been seen, more or less distinctly, by political economists, that the increase of wealth is not boundless: that at the end of what they term the progressive state lies the stationary state, that all progress in wealth is but a postponement of this, and that each step in advance is an approach to it.’⁹

Mill envisaged a post-capitalist world of co-operative enterprise where greed and avarice would fade and growth would be unnecessary. Once the problems of production were solved he imagined ‘a well-paid and affluent body of laborers… not only exempt from coarser toils, but with sufficient leisure, both physical and mental, from mechanical details, to cultivate freely the graces of life…’¹⁰

Mill was perhaps ahead of his time in predicting that endless economic growth was inevitably self-defeating. But others were to follow in his footsteps.

Soddy and Keynes

One of the most notable, but largely unsung, critics of the orthodox growth model was the British chemist-cum-economist Frederick Soddy. In the wake of World War One, Soddy was devastated by the role his fellow scientists had played in the senseless carnage. He decided to devote himself to political economy and brought his formidable scientific background to the task. (He had already won the 1921 Nobel Prize in chemistry for his work on radioactive decay.) Soddy began by looking at the laws of thermodynamics, which you may remember from your high-school physics classes.

The first law says that energy can neither be created nor destroyed; it can only be transformed from one form to another. For example, when gasoline is burned in your car’s engine you are converting the original solar energy captured millions of years ago into mechanical energy, plus heat and waste exhaust. The first law leads elegantly into the second law, sometimes known as the ‘entropy’ law. The second law says that every time energy is converted from one form to another we lose some of the initial energy in the form of dissipated heat. What that means is that all energy use flows from low entropy to high entropy. In other words, the world is in a long downhill slide. And the higher the entropy, the less likely we are able to use that form of energy in any useful way.

What Frederick Soddy did was to apply his knowledge of physics to the money economy. In his 1926 book, Wealth, Virtual Wealth and Debt: The Solution of the Economic Paradox, Soddy argued that money and debt were at the root of our economic problems because they were not subject to the entropy law. Real wealth, he said, is concrete: furniture, houses, computers, farm animals, footballs, etc. This wealth, he said, is mutable and subject to decay over time. In other words real wealth is also trapped in the downward spiral of entropy. But money and debt are ‘virtual wealth’, Soddy wrote, abstractions subject only to the laws of mathematics. Debt, in particular, he cautioned, was a claim on future wealth, which could grow out of all proportion to the rate at which real wealth is created. Rather than decay, debt is a human construct that can grow indefinitely at any rate we decide. It is this debt as virtual wealth, according to Soddy, that is the driving wheel of growth:

‘Debts are subject to the laws of mathematics rather than physics. Unlike wealth, which is subject to the laws of thermodynamics, debts do not rot with old age and are not consumed in the process of living. On the contrary, they grow at so much per cent per annum, by the well-known mathematical laws of simple and compound interest… It is this underlying confusion between wealth and debt which has made such a tragedy of the scientific era.’¹¹

Soddy’s thoughts on entropy and the bio-physical limits to growth were ignored at the time. But one of his contemporaries, John Maynard Keynes, was much more influential. Like Mill, Keynes was an iconoclast, a brilliant economist with a restless intellect. In the midst of the Great Depression of the 1930s Keynes advocated that government take an active, interventionist role in both fiscal and monetary policy. Firm government regulation and an active fiscal policy could, he said, kick-start growth in times of economic malaise. He believed the impact of state spending would catalyze the economy, create jobs and stimulate consumption. And he was right. Keynesian economic policies slowly helped to lift the world out of depression and became the dominant tools used by Western governments to manage national economies until the era of Ronald Reagan and Margaret Thatcher in the late 1970s and early 1980s.

But Keynes was not an unthinking cheerleader of growth. He wrote at length about the ethical problems of capitalism and the ‘love of money’ which, he reckoned, was the driving force behind economic expansion for its own sake. An economy that places money at the center will have no cut-off point, he believed, because ‘abstract money will always seem more attractive than concrete goods’. According to his biographer Robert Skidelsky, Keynes suggested that there should be ‘moral limits’ to growth long before the ‘limits to growth’ concept was first popularized in the 1970s. Those limits, Keynes wrote, should be based on a proper understanding of ‘the ends of life and of the role of economic motives and economic growth in relation to those ends’.

According to Skidelsky: ‘Keynes never ceased to question the purposes of economic activity… his conclusion was that the pursuit of money… was justified only to the extent that it led to the “good life”. And a good life was not what made people better off: it was what made them “good”. To make the world ethically better was the only justifiable purpose of economic striving.’¹²

Georgescu-Roegen and The Limits to Growth

Like Frederick Soddy, the Romanian-American economist Nicholas Georgescu-Roegen was also a pioneering critic of economic growth. In his 1971 book, The Entropy Law and the Economic Process, Georgescu-Roegen refined Soddy’s analysis, arguing that the human economy is a thermodynamic system, which is ultimately dependent on the physical world and therefore constrained by what he termed ‘bio-economic’ limits. Entropy, he said, increases inexorably and eventually runs head on into the finite material basis of growth. Low-entropy energy and materials are combined to turn natural resources into goods, services and the inevitable waste products. It is therefore impossible to escape the limits of the physical world and the inexorable decline in the capacity of energy to do work. This perpetual winding down thus defines the limits of the human economy. Georgescu-Roegen developed his own fourth law of thermodynamics which says, in part: ‘in a closed system, the material entropy must ultimately reach a maximum’ which implies that ‘complete recycling is impossible’.¹³ He spoke of natural resources in terms of ‘renewable and non-renewable stocks’ and ‘flows’.

These terms are now widely used in the burgeoning field of ecological economics. As the key modern theorist of entropy, Georgescu-Roegen’s analysis was a major influence on this increasingly important field of study. His thought also shaped the enormously influential Club of Rome report, The Limits to Growth, published in 1972. In fact, Georgescu-Roegen was a close friend and confidant of Dennis Meadows, the young Harvard systems-management expert who spearheaded the groundbreaking study.

The Limits to Growth was a runaway bestseller that forcefully put the question of growth and the environment on the public agenda. It sold 12 million copies and had such wide-ranging influence that US President Jimmy Carter even commissioned a report from the Council on Environmental Quality to look at how limits to growth might impact the US economy. The report found that ‘if present trends continue, the world in 2000 will be more crowded, more polluted, less stable ecologically and more vulnerable to disruption than the world we live in now. Serious stresses involving population, resources and environment are clearly visible ahead.’¹⁴

The Limits to Growth was a watershed because it raised fundamental questions about endless growth on a finite planet. Meadows and his colleagues used Massachusetts Institute of Technology computers to examine economic growth since the industrial revolution – this was 1972 and the use of computers to make this kind of scientific projection was in itself revolutionary. They primed the machines with data on resource use, food production, land use, population, industrial production, pollution and a host of other variables, including non-linear feedback loops between the various data sets. They then crunched the numbers and came out with extrapolations of what might happen in the next century. Their conclusions were stark and a little scary in the booming 1970s. With capitalism triumphant and the system humming along, decision-makers didn’t really want to bother thinking about such things. The report concluded that, if current growth trends continued, the global economy would hit the wall sometime in the 21st century. The gradual depletion of natural resources and the fouling of the environment would combine to increase prices, collapse living standards, level populations and stop growth in its tracks. Meadows and company did not say this was inevitable, just likely without major changes to the dominant system of industrial production. Nonetheless, they came in for a barrage of criticism from both Left and Right.

From the Left the concern was that the Club of Rome that commissioned the Report was an élitist cabal of technocrats out to sabotage the poor by shutting off the growth tap. Instead of consumption, resource use and environmental limits, they focused on population and inequality, dismissing the ‘limits’ arguments as both premature and irrelevant to the pressing problem of poverty and social justice. The Right also dismissed The Limits to Growth as specious scare-mongering in a time of obvious abundance in western Europe and North America. Few mainstream economists lauded the work; most saw it as technically flawed, falling back on standard neoclassical economics to underscore their criticisms. They were especially exercised because the data failed to take into account the role of new technology and the ‘price mechanism’ – the notion that higher prices, by stimulating new supplies and encouraging substitution, can side-step resource depletion and open the way to perpetual growth.

Neither side really grasped the point: that we are on a collision course with the natural limits of the planet, living off our capital rather than our interest. The day of reckoning will come. We can do something about it, or we can ignore it. The choice is up to us.

In 2004, the authors published Limits to Growth: the 30-Year Update, which used essentially the same model as the original but updated the data. The results echoed the findings of 1972.

As physicist and climate blogger Joe Romm told Thomas Friedman of the New York Times: ‘We created a way of raising standards of living that we can’t possibly pass on to our children. We have been getting rich by depleting all our natural stocks – water, hydrocarbons, forests, rivers, fish and arable land – and not by generating renewable flows.’¹⁵

By the mid-1970s the critics had won. Concerns about limits to growth began to recede from public debate. Yet the report’s findings continued to resonate in the burgeoning environmental movement. Indeed, Limits to Growth changed the language of environmental discourse and gave birth to the field of ecological economics where growth is the central focus. The Club of Rome report put in place the notion of renewable and non-renewable ‘stocks’ and ‘flows’ of natural resources. And these concepts set the stage for what we’ll look at in the next chapter.

What are the limits of our energy and raw materials? Can efficiency, producing more with less, solve our problems?

1 Darwin’s original title was: On the Origin of Species by Means of Natural Selection, or the Preservation of Favoured Races in the Struggle for Life.

2 Herman Daly, Beyond growth: the economics of sustainable development, Beacon Press, 1996.

3, 4 Cited in Bill McKibbon, Deep Economy, Holt, 2008.

5 Brian Milner, ‘Global outlook turns darker’, The Globe and Mail, 9 Oct 2012.

6 Suzanne Daly, ‘Spain Recoils as Its Hungry Forage Trash Bins for a Next Meal’, New York Times, 24 Sept 2012.

7 Earth Policy Institute, www.earth-policy.org/data_highlights/2011/highlights18

8 Growth isn’t possible, New Economics Foundation, 2010.

9, 10 John Stuart Mill, Principles of Political Economy with some of their Applications to Social Philosophy, Book 4, 1848.

11 Frederick Soddy, Wealth, Virtual Wealth and Debt: The Solution of the Economic Paradox, Dutton, 1926.

12 Robert Skidelsky, John Maynard Keynes, 1883-1946: Economist, Philosopher, Statesman, Penguin, 2005.

13 Cited in Christian Kerschner, ‘Economic de-growth vs steady-state economy’, Journal of Cleaner Production 18, 2010.

14 Peter A Victor, Managing Without Growth, Edward Elgar, 2008.

15 Thomas L Friedman, ‘The Inflection Is Near?’, New York Times, 7 Mar 2009.