Uneconomic Growth:  When Expansion Means Depletion

Let’s shift gears.

Last week here at 13.7 we had wonderful discussion about science and human spirituality. Today lets ask a more down-to-earth question about economics.

While the 13.7 community was discussing science and religion, a raft of new data was released indicating the U.S. economic recovery was slowing.  The data renewed fears about the viability of both the U.S. and world economic rebounds.  The focus of the fears often comes down to a single indicator – a single word even – growth.

It was the slowing of US economic growth last week that set the alarm bells ringing. It is a contraction of growth that makes the specter of a “double dip” recession so terrifying.

With the reality of so much human suffering occurring in the midst of these economic uncertainties, coupled to the ongoing ecological drama unfolding in the Gulf of Mexico, it’s hard not to ask questions about the assumptions underlying our model of growth and prosperity.

To be specific: What is the meaning of continued economic growth when you live on a finite planet?

 

Growth is our god.  Companies that do not grow at feverish rates are punished in the stock market.  Cities, which do not grow, pushing ever outward in endless suburban development, are considered moribund.  Nations that do not grow are seen to fall behind in the global race to wealth.

Growth, of course, implies endless reservoirs of resources that can be tapped:  more land, more stocks of fish, more minerals, more energy sources.

This is, of course, the problem.

Growth pushes ever upwards but resources have ceilings.  While it might seem obvious to us now, the structure of our entire economic system was designed before this fact became apparent.  Some people of course have noticed the paradox and put thought into alternatives.

Herman Daly is one of those trying to think through to a new economics.  Daly is a professor at the University of Maryland who has worked with the UN and the World Bank.  One of Daly’s most compelling ideas (also developed by a number of other ecologic economists) is the notion of Uneconomic Growth.  As Daly puts it:

When the economy’s expansion encroaches too much on its surrounding ecosystem, we will begin to sacrifice natural capital (such as fish, minerals and fossil fuels) that is worth more than the man-made capital (such as roads, factories and appliances) added by the growth. We will then have what I call uneconomic growth, producing “bads” faster than goods—making us poorer, not richer.

In this perspective certain kinds of growth – the kind we have been taught to lust after – is a matter of scale.  It can only be sustained for a limited time before it runs its course.  As Daly puts it:

Once we pass the optimal scale, growth becomes stupid in the short run and impossible to maintain in the long run. Evidence suggests that the U.S. may already have entered the uneconomic growth phase

Recognizing such a thing as bad growth just doesn’t seem to be part of the current world economic model.  We live, says Daly, in an “empty world” economic system that imagines resources appearing from nowhere and waste disappearing back into that nowhere.

The real world costs of growth in the midst of planetary limits, and planetary scarcity of key resources, simply isn’t built in to the systemic thinking.  As Daly puts it:

To deal with this new pattern of scarcity, scientists need to develop a “full world” economics to replace our traditional “empty world” economics.

This seems so basic to humanity’s new understanding of itself as a global species (with enormous global power and responsibility).

At some point we will have to do more than cross our fingers and hope this quarter’s returns show strong growth. Instead we will need a different model.  I don’t know when or how such a change can be enacted but it is likely to be forced on us sooner rather than later.   Once that happens we will start asking who ultimately pays for uneconomic growth.

The events in the Gulf these last few months make the answer to that question pretty clear.