The Limits to Growth

The title of this section of discussions corresponds to a book that was published in 1972, which presented the findings of a computer model, which attempted to simulate the effects of exponential economic and  population growth, when  constrained by finite resources. The review of this work will be covered in the following discussions:

While the goal of this entire review is only to outline the scope of this model, this initial discussion might be seen as an introduction to the fundamental problem associated with economics predicated on continuous economic growth, be it exponential or linear in nature. For example, the use of energy in the US has grown at rate of ~2.9%/year since 1650; but a continuation of this exponential growth rate will not just lead to global warming of a few degrees, but eventually to a thermal meltdown of the world as we know it.

So what might this tell us about the possibility of continuous economic growth?

First, let us clarify the scope of the ‘growth’ in question, e.g. a 5% economic growth means an economy that is 5% larger than the previous year, every year. While this may not sound unreasonable, it still represents an exponential growth that is unsustainable in the long term, even though the idea of growth appears to be a fundamental assumption of our current economic system.

Note: If we were to switch to a 5% linear growth, i.e. a fixed increase every year, we would end up doubling the system in 20 years and in a 100 years it would be five times bigger, as opposed to 132 times bigger with a 5% exponential growth. However, it should still be self-evident that even linear growth does not solve the problem of a world with finite resources, only delays the inevitable.

Of course, it is possible that increased technological efficiency might allow a degree of continued economic growth. For example, if we assumed increased energy efficiency, it would allow more homes to be powered and more goods to be manufactured on a fixed energy usage. However, in practice, there must also be a finite limit to the efficiency gains, such that a maximum ceiling would still be reached and economic growth would again cease.

Is there an alternative to the growth model?

If we view economics as an applied science, rather than a mathemetical abstraction, we quickly have to recognise that the global economy is rooted in a physically finite world. As such, our economy is not only dependent on money flow and energy, but all the other physical resources required for the production and transportation of food and goods. As such, the idea of never-ending economic growth appears to be fundamentally flawed and therefore a dangerous assumption on which to predicate the ongoing ‘Wealth of Nations.

So what ‘evolutionary’ processes might come to limit growth?

The start of this series of discussions was entitledThe Evolution of the Economy. As such, the scope of ‘evolution’ was initially limited to the development of evermore sophisticated financial mechanisms that have come to underpin today’s global economies. However, at the end of this first opening discussion, a reference was made to ‘evolution’ in its normal context, i.e. survival-of-the-fittest, because it was recognised that, at some point, even abstracted economics will have to face up to the reality of a world with finite natural resources. So while most people may normally perceive economics and evolutionary biology to be different in scope, they can both be described in terms of a ‘system’ controlled by similar mechanisms, which will ultimately govern its evolutionary growth over time:

Growth: A system can continue to grow until it reaches a certain limit defined by the capacity of this system. This capacity is the natural limit imposed on the system, as defined by its available resources. As this capacity is approached, growth slows and can even go into decline, if the natural capacity of the system is exceeded.

So, in this case, we are describing the Earth as an ecosystem, where some resources are ‘renewable’ and some ‘non-renewable’. Therefore, if the system as a whole has a dependency on non-renewable resources, it should be self-evident that there has to be some finite limit to growth.

But how is this limit quantified in economic terms?

In 1972, a book was published entitled ‘The Limits To Growththat attempted to present the findings of a computer model, which appeared to highlight some potentially pessimistic consequences for planet Earth. In this model, the Earth is a system subject to exponential growth linked to population, industrialization and food production, which also attempts to account for resource depletion and pollution. As a result, this book ended up making some serious commentary about the impact of the global economy, which was not well received, or accepted, in certain quarters of society. In this wider context, the motive behind this overall discussion of ‘economics’ was never to try to understand all the complex details associated with myriad of financial mechanisms, but rather to simply gain some insights to its limitations. However, the following quote might help explain why the supporters of the ‘The Limits to Growth’ position have been battling uphill for over 40 years to get politicians and economists to revaluate their thinking:

“The economist Michael Spence asks a simple yet evocative question: Why do we want our economy to grow? It’s rare, though, to hear an economist even raise theoretical doubt over such a deeply ingrained assumption in Western economies; one may as well ask why we want electricity. In the United States, we hear that economic growth should trump nearly all other social and political considerations, while possibly only giving lip-service to other important values, e.g. environmental protection, health and safety, wealth redistribution. As such, almost no one anywhere on the modern political spectrum argues that we should not try to grow the economy or that never-ending growth is impossible.”

While it is a generalisation, the quote may well be representative of the importance that most economists, politicians and even the ‘democratic’ majority still place on continued growth in the economy. Basically, the idea of growth is assumed to underpin the overall living standards within most nation-states. Of course, this is not necessarily how ‘evolution’ will continue to operate in a world of finite resources.

But how did evolution get us this far?

As a brief summary, we might realise that the last few centuries has seen a population explosion and corresponding exponential increase in resource consumption brought about through technological innovation and industrialisation. However, these developments have also required a huge increased in energy usage, which was sourced from non-renewable fossil fuels. This increase in energy then allowed the development of mechanised machines that led to a corresponding exponential increase in the extraction of other natural resources, plus the now accepted side-effects of pollution. This mechanisation also encompassed farming, both agricultural and fisheries, such that the production of food could be increased to meet the needs of an ever growing population. Likewise, developments in chemistry and medicines helped to address a 'naturally' high infant mortality rate plus supported an 'unnatural' increase in the human life span, which in-turn contributed further to the exponential increase in the global population.

Note: The highlighting of the words 'natural' and 'unnatural' is not intended to imply criticism of these benefits to human existence, but rather to highlight that human evolution already operates outside the normal rules of 'natural selection'. In this context, the word 'natural' does not necessarily imply inevitable or preordained.

So, within this collective melting-pot of growth factors, modern economies also flourished and grew exponentially, such that it is now seen as the norm, which has to be maintained at all cost, even though many natural resources are now nearing depletion. To summarise:

  • It would seem that we are nearing, or even past, the point of peak production of a number of critical non-renewable resources, such as oil, natural gas and coal plus other key minerals.

  • While there is growing acceptance that the global climate is being destabilized by the greenhouse gases emitted through the burning of vast quantities of fossil fuels, little has actually been done to address the central problem.

  • Freshwater is becoming both a real and growing problem to many of the nations of the world due to climate change, pollution and the overuse of groundwater to maintain and expand agricultural and industrial processes.

  • Despite initial increases due to mechanisation, world food production per capita is now in decline as the maintenance of existing crop yields faces growing threats from climate change, soil erosion, water scarcity and high fuel costs.

  • Increase numbers of plants and animals are being driven to extinction by human activities at a rate unequalled in the last 60 million years. The net result on the ecosystem as a whole is hardly perceived, let alone understood.

As such, there appears to be mounting evidence that the exponential growth created by the industrial revolution and relatively cheap energy in the form of fossil fuels is coming to an end. However, it is also possible that this era has already sown the seeds of a future environmental crisis, which will only compound the problems that are still being debated, let alone being addressed in any effective way. With these issues in mind, we might now take a closer look at the original 1972 ‘Limits to Growth model.