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The Secret of Eternal Growth? It’s Wishful Thinking

November 12, 2018

I want to believe in eternal economic growth. Given what humanity is facing with climate change and other consequences of our collective consumption, it must be awfully comforting to have faith in a cornucopian future where no one ever goes wanting. Especially if all we have to do is more of the same, sticking to capitalism’s exploitative playbook. I used to have that faith. I was a worshipper of technological progress and its potential to overcome all the social and environmental problems that accompany exponentially increasing population and consumption. I also used to believe in the Easter Bunny. Unlike Michael Liebreich (author of “The Secret of Eternal Growth,” the article I’m rebutting), however, I paid enough attention to the evidence to put aside such fantasies.

I intend to provide a blow-by-blow analysis of Liebreich’s contentions, but I feel compelled to start with a gem near the end of his article. In a one-sentence paragraph that summarizes his thesis, he writes, “The bottom line here is that the world’s most feted scientists and economists have shown that economic growth is consistent with environmental protection and the mitigation of climate change.” Here’s a small point: his use of a financial metaphor (“bottom line”) may reveal something about how much the culture of money influences his thinking. But here’s the bigger point. Really?!? What the hell is he talking about?

Let’s start with his claim about scientists. It’s a safe bet he hasn’t read the World Scientists’ Warning to Humanity. This article appeared in the peer-reviewed journal BioScience in December 2017. In the article, which was endorsed by more than 15,000 scientists at the time it was published, the authors write, “We are jeopardizing our future by not reining in our intense but geographically and demographically uneven material consumption and by not perceiving continued rapid population growth as a primary driver behind many ecological and even societal threats.” These scientists are saying very specifically that economic growth (which consists of growth in consumption and population) is inconsistent with environmental protection and mitigation of climate change. They also conclude that it is “time to re-examine and change our individual behaviors, including limiting our own reproduction (ideally to replacement level at most) and drastically diminishing our per capita consumption of fossil fuels, meat, and other resources.”

Perhaps Liebreich doesn’t feel like the scientists behind the BioScience article qualify as “our most feted.” On that front, though, it’s worth noting that the article is an update to the original warning to humanity that was published in 1992 and endorsed by the majority of living Nobel laureates in the sciences. And how about Stephen Hawking – does he count? In 2017, he made headlines when he said that humans need to find a new planet to inhabitwithin 100 years, given the risks we face from climate change, population growth, epidemics, and the potential for asteroid strikes. Maybe Liebreich meant “fetid” instead of “feted.”

Among economists, you can certainly find plenty who are celebrated for promoting infinite exponential growth. Captains of industry love these guys, because proclamations from economists (who often have little or no training in physics or ecology) give them the rationale they need to continue their programs of profiteering. Neoclassical economists from universities around the world have repeatedly claimed that economic growth is consistent with environmental protection, but “claiming” and “showing” are two different things. In fact, economic growth has been tightly correlated with biodiversity loss, and the theorized inverse relationship between per capita GDP and environmental damage has been debunked. More on economists as I get into my blow-by-blow below.

Liebreich gets his thesis rolling in the first paragraph with this doozy: “…the award of the Nobel Prize in Economics to Paul Romer and William Nordhaus, in the same week, can only be interpreted as a huge slap in the face for the champions of ‘degrowth’.” So what? It’s not an out-of-the-blue slap in the face. The Nobel Prize in Economics is actually the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, established in 1968 by Sweden’s central bank. The prize, which was tacked onto the original slate of Nobel Prizes, is rooted in growth-based economics and has regularly been awarded to neoclassical economists, including Milton Friedman, Robert Solow, and now Romer and Nordhaus, all of whom are on board with the capitalist growth paradigm.

Over the next few paragraphs, Liebreich enters the realm of physics and energy. I give him props – most growth-obsessed businessmen don’t bother with such topics. But he quickly goes off the rails. His claim is that scientifically literate economists and engineers, such as Nicholas Georgescu-Roegen, Jay Forrester, Herman Daly, Jeremy Rifkin, and Tim Jackson, have all misunderstood the laws of thermodynamics and their effect on economic processes. He thinks that because the Earth receives a daily dose of energy from the sun that we can have endless growth, which may be bolstered or sped up by nuclear fission and fusion. He calls the notion of a limit to growth “pure fake science” (This is “fake science” in the same way the New York Times is “fake news”.). Well, how about checking in with a scientist?

Tom Murphy, a professor of physics at the University of California, San Diego, has done the math on energy growth and limits. He exposes just how ridiculous it is to pine for ongoing exponential growth in energy consumption. In his scenario, we maintain the rate of growth of energy use at 2.3% per year, which is less than the 2.9% rate we’ve been able to achieve over the last few centuries. And just for fun, he has us using solar panels that are 100% efficient at turning sunlight into electricity – a physical impossibility (solar photovoltaics’ efficiency is currently about 1/5th of that). Given the 2.3% growth rate, we would have to cover the whole surface of the Earth, land and water, with solar panels in just 400 years. Murphy doesn’t stop there, though. He also analyzes fusion as a source of energy. At 2.3% annual growth, fusion or any source of energy would produce as much energy as the sun within 1,400 years, a virtual drop in the bucket of human history, so the surface of the Earth would have to be hotter than the surface of the sun.

I can almost hear Liebreich’s protests right now: economic growth isn’t the same thing as energy growth! He and Murphy agree on this point. At first the economy grew more or less together with energy, but since 1950 economic growth has outpaced energy growth by a couple of percentage points. Murphy points out that the difference between economic and energy growth can be split into two categories: efficiency gains and “everything else” which he classifies as finance, real estate, innovation, and other aspects of the service economy (note: Liebreich heaps praise on Romer’s Endogenous Growth Theory that explains how accumulated knowledge contributes to economic growth – Romer’s “knowledge” component of growth corresponds with Murphy’s “everything else” category).

Murphy quickly discredits the possibility of endless efficiency growth with a little bit of thermodynamic expertise and some arithmetic. He then asks the practical question, “In a future world where energy growth has ceased, and efficiency has been squeezed to a practical limit, can we still expect to grow our economy through innovation, technology, and services?” He again runs the numbers to test the idea. He assumes 5% economic growth over the long term and calculates what fraction of economic activity has to come from the non-energy-demanding sector. In just a hundred years, that fraction gets close to 100%. Expenditures on food, energy, and manufactured goods would be negligible. But how massive of a service sector can be supported on top of a relatively small agricultural and industrial sector? Just how many people will be engaged in trading commodity futures, orchestrating credit default swaps, and writing blogs when the limits of food production have been reached?

Liebreich surprises again by departing from most other critics who deny the reality or dismiss the seriousness of climate change. He understands that climate change is “real, serious, and urgent,” and goes on to say that we need to apply technology, “both new and yet-to-be-developed, on a heroic scale” to avert climate change. Notice how he’s proposing we rely on the same game plan—economic growth plus technology—to solve the very problem it caused (but at least he concedes we need to do something). With this unoriginal game plan of more growth and more technology, he hands the ball to his star player, William Nordhaus. Nordhaus’s work on climate change and economic growth, which won him the Nobel, is questionable when applied to the real world. In 1991 he said, “Agriculture, the part of the economy that is sensitive to climate change, accounts for just 3% of national output. That means that there is no way to get a very large effect on the US economy.” Hmm, so if there’s a significant reduction in access to food in this country, there will be little effect on the economy? And what about all the economic transactions that occur in coastal areas – might there be a substantial effect on the economy when those areas are part of the ocean? Give him another Nobel – maybe he can share it with this guy.

After Nordhaus, Liebreich continues on his tour of Nobel laureates with Simon Kuznets, who won the prize for his work on national income accounting. Kuznets found that income inequality tended to increase as economic activity grew in a given nation, but at some point inequality would level off and then decrease. This relationship became known as the Kuznets curve. Liebreich brings up Kuznets so he can drop a reference to the concept of the environmental Kuznets curve, which has very little to do with Kuznets’s actual work. Kuznets came up with the idea of tracking economic output at the national scale – he invented what would evolve into the king of all economic statistics, gross domestic product (GDP). Kuznets himself was very concerned with how his work might be misapplied. In a 1934 report to the US Congress, Kuznets said, “The welfare of a nation can scarcely be inferred from a measure of national income.” He went on to advise, “Goals for more growth should specify more growth of what and for what.” What a refreshing sentiment, but also a sad one, given how Liebreich and other “growthists” in charge of the economy have completely ignored Kuznets’s warning. Two more points about the oddity of Liebreich’s decision to use Kuznets in support of his contentions:

  • He states that “Environmental Kuznets Curves has [sic] been shown to govern most forms of local pollution.” That’s great for local pollution, but if too much growth causes widespread global pollution (e.g., climate change) or other global environmental calamities (e.g., biodiversity loss, including the loss of species we depend upon for pollination, loss of topsoil, degradation of ecosystem services), there’s not much to celebrate in theoretical environmental Kuznets curves.
  • Liebreich is aware of the flaws in GDP, and he wants to replace it with a different measure that adds up natural capital (nature’s bounty), human capital (knowledge), and manmade capital (infrastructure). I share this perspective, but let’s be clear: growing the economy means growing GDP. Growth is about quantity – it’s an increase in the number of people, or per capita consumption, or both. If we were to change GDP to reflect “wellbeing” or “true wealth” (something very different from the dollar value of economic output), and then we set a goal of optimizing the economy based on this indicator, we wouldn’t prescribe continuous growth. We would balance economic production and its consequences with preservation of natural ecosystems and the services they provide.

From Nordhaus, Liebreich continues on his weird journey of Nobel worship and selects Ilya Prigione (awarded the prize in chemistry in 1977) as his next stop. His interpretation of Prigogine’s work is downright bizarre. I’m no expert in Prigogine’s research on non-equilibrium dissipative structures, but I’ll take at face value Liebreich’s description of it. He notes that Prigogine observed “how a flow of energy across a closed system can drive the creation of ‘order out of chaos’.” Here’s the bizarre part. From that single observation, Liebreich stunningly concludes, “This is a real scientific expert on entropy proving that the economy can grow for as long as there is still a sun in the sky (which would give us about another five billion years).” Wait, what?!? “Order out of chaos” is not the same thing as “unending growth out of chaos.” Take, for instance, a snow globe as an example of a closed system. Applying energy across the snow globe could produce order from the chaos – maybe you could get the snowflakes to line up in neat little rows. But it doesn’t mean you could produce an exponentially growing number of snowflakes for the next five billion years! If I wanted to make a similar argument, I’d point out that Einstein won the Nobel Prize in physics for his work on the photoelectric effect. Then I’d say, “This is a real scientific expert on matter and energy proving that the economy will infinitely shrink as long as Captain Kirk and Spock remain pals.”

If Liebreich wants to apply the work of a “real scientist” who won the Nobel Prize in chemistry, why does he select Prigogine, anyway? He should be reporting the work of Frederick Soddy. Soddy won his prize in 1921, but then he changed course. Disillusioned with how his work and the work of his colleagues in chemistry was being repurposed for immoral uses in war, he decided to apply his scholarly skills to economic questions. In studying economic growth, money creation, and finance, Soddy noted, “You cannot permanently pit an absurd human convention, such as the spontaneous increment of debt (compound interest), against the natural law of the spontaneous decrement of wealth (entropy).” To borrow Liebreich’s argumentative structure again, this is a real scientific expert who understands that a reliable flow of energy is the key to economic activity, and that the flow is finite. It’s worth pointing out that Soddy’s economics career wasn’t a delusion of grandeur born of a midlife crisis – he generated original, insightful, and useful ideas. He proposed five economic policies that were dismissed at the time as outlandish. Four of the five have since been adopted as standard practice. The fifth – remove the power granted to banks to create money out of thin air – is still waiting in the wings, because this policy is antithetical to the pursuit of continuous growth.

The tour of “Nobel-ity” continues. Liebreich unexpectedly highlights the work of Elinor Ostrom. I say “unexpectedly” because many supporters of ecological economics and degrowth turn to Ostrom for insight. Liebreich summarizes her work with this paradoxical statement: “It turns out that with effective governance and social structures, groups of individuals are quite capable of managing shared resources without relying on top-down government edicts.” I don’t know what he means by “top-down government edicts,” but he is arguing for effective governance and social structures, an argument which directly opposes his call for unlimited economic growth. Here’s why: the economy grows when shared resources are removed from the commons and brought into the realm of economic transactions. If a community publicly owns a lake and shares the resources it provides (recreation, fish, etc.), no money changes hands and the economy doesn’t grow. But if one enterprising capitalist gains ownership of the lake and starts charging a price for access, then he has monetized the activity around the lake and set the economy to growing. Everyone, except the one capitalist, may be worse off, but we’ve got growth – hooray!

Along with his strange interpretations of the work of selected Nobel laureates, Liebreich also makes strange pronouncements about the left/right political division. He seems to think there’s a sinister leftist agenda to impose a draconian global governing body and wreck the economy by preventing perpetual exponential growth. But many people concerned about the tradeoff between growing the economy and protecting the life-support systems of the planet aren’t all that keen on global governance. Instead they want stronger, more resilient local economies, which amounts to greater abilities and power residing in communities. Even ecosocialists, who are on the opposite side of the political spectrum from Liebreich, see small farms (not global bodies) as seats of sustainable governance. The wicked problem of overshoot (overpopulation combined with overconsumption) is not a left versus right problem; it’s a problem for every single human being on Earth.

I’ve poked holes in Michael Liebreich’s arguments, and along the way I’ve poked fun at him. He seems like a smart man, and I actually think his heart’s in the right place – he wants good things for humanity. And unlike most growthists, he even wants each country to preserve a substantial portion of natural ecosystems. The trouble is that he’s got conflicting goals. Continuous economic growth (increasing population and consumption) is incompatible with both preservation of natural ecosystems and long-term sustainability of human society. You don’t solve overshoot by overshooting further! He is willing to bend facts to fit his economic-growth-at-all-costs ideology. I used to fall into the same trap, but I’m not waiting around for the Easter Bunny to deliver some sort of magical eggs that’ll save us. And unlike Liebreich, I’m certainly not betting the future of humanity or the planet on Ronald Reagan’s Disneyesque “there are no limits” rhetoric.

If Leibreich is so keen on scientists and Nobel laureates, why leave the last line to a president whose main gig was playing make believe in Hollywood? He could have chosen a president with a Nobel Prize and a background in science (including nuclear physics), farming, and business – Jimmy Carter. Carter said, “…too many of us now tend to worship self-indulgence and consumption. Human identity is no longer defined by what one does, but by what one owns. But we’ve discovered that owning things and consuming things does not satisfy our longing for meaning. We’ve learned that piling up material goods cannot fill the emptiness of lives which have no confidence or purpose.” We desperately need an economy that can meet humanity’s needs without risking environmental meltdown and undermining the basis for civilization. It’s a smaller economy, but one concerned with meaning and purpose rather than growth. In the end, there is no “secret of eternal growth.” The secret is that we need to let go of the obsession with growth.

Originally published at Resilience.org.

Photo by Aditya Vyas on Unsplash