Collision Course: Endless Growth on a Finite Planet (7 page)

The discontinuity between a historically modest economy and the novelty of twentieth-century growth helps to explain the shortcomings of the classical economists’ preanalytic framework, which underpins current neoclassical economics. Their original understanding of economic realities was established long before the immense bursts of economic growth that have characterized the past 140 years. Daly points out that “our information and control system (prices) assumes nonscarcity … of environmental source and sink functions.”
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Only since about 1870 has the rate of doubling become large enough in a planetary context to call this nonscarcity into question, and only since the end of World War II has the magnitude of the industrial base and of the human population yielded immense increments with each doubling.

According to Daly, economists’ attitudes to scale involve a curious inconsistency. While microeconomics recognizes an optimal scale, where marginal costs equal marginal benefits, no such optimal scale is recognized for the macroeconomy: “There are no cost and benefit functions defined for growth in scale of the economy as a whole. It just doesn’t matter how many people there are, or how much they each consume.” Daly goes on to note the implication: “If the ecosystem can grow indefinitely then so can the aggregate economy. But, until the surface of the earth begins to grow at a rate equal to the rate of interest, one should not take this answer too seriously.”
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Daly proposed what he called the “steady-state” economy as a solution to these problems of economic scale. The key elements of his model are “a constant stock of
physical
wealth (capital), and a constant stock of people (population) … maintained by a rate of inflow (birth, production) equal to the rate of outflow (death, consumption)”—which amounts to zero growth in both population and material production. Daly’s second requirement is for the rate of flow through the system to be minimized, which means minimum replacement of both people and capital plant. Daly argues that human development does not need to cease when the material infrastructure of production is stabilized; he distinguishes between physical or quantitative growth and development, which involves the qualitative evolution of society, including technique, design, and culture. He argues that his system will preserve plenty of scope for development while curtailing the growth of all material flows.
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Daly’s steady-state economy assumes a free market structure, which he regards as a good system for fulfilling allocation functions. He notes, however, that it fails to solve two critical problems: that of just distribution and that of optimal—or even sustainable—scale.
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Such an economy, originally mooted as the “stationary state” by John Stuart Mill
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before the really explosive growth began, may be a desirable plan for the conduct of future economic life—perhaps the only even remotely realistic one from a thermodynamic point of view—but Daly provides virtually no guidance on what, if any, social and political processes could precipitate a transition to such an outcome. Nor does he ask how industrial capitalism could be persuaded to accept such stricture and regulation.

For more than forty years, Daly has explored the inability of mainstream economics to come to grips with the physical dimensions of the real world, to think outside the growth paradigm on which it rests. Yet even though economic orthodoxy underwent significant change during that period, as the postwar synthesis of Keynesianism and neoclassical economics was supplanted by a new neoliberal framework, the expectation of unending economic growth has never subsided.

Modernity and Its Ideologies

The appeal of growth economics is rooted in the ideas surrounding modernity, with its emphasis on material progress and the individual. Modernity may, in fact, be the key driver of ecologically unsustainable practices, as the ecological economist Richard Norgaard argues.
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Several key assumptions characterize the philosophy of modernity: unbridled optimism about “progress,” the validity of “value-free facts,” and belief in the preeminence of Western culture, which is expected to sweep cultural differences aside as people discover the effectiveness of a universalized rational approach. Indefinite material progress powered by improved technology is expected to guarantee that future generations will always be better off than their predecessors. Yet there is a circular logic implicit in recommending more industrial growth to solve the problems created by growth in the first place.
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The “progress” agenda relies on the epistemological premises and beliefs that developed out of the Scientific Revolution and are taken for granted in Western public discourse and institutions. Policy is developed one issue at a time with the aid of single-field experts, who are thought to be capable of “objective” assessment of “the facts.” While this approach has been extremely effective in the design of industrial processes and manufacturing technologies, it is less appropriate to complex systems such as ecologies and cultures. Even though, using the techniques of objectivity and expertise, industrial technologies can yield maximum productivity per worker and smooth operation, their complex interactions with people and communities require an additional level of engagement. A new freeway built using state-of-the-art technology might be a fabulous road from a driver’s point of view but its actual value depends on the full range of its environmental consequences over its life span and whether it serves the needs of its community better than alternatives such as mass transit.

A related premise of progress is the idea that a few universal principles govern everything and that Western rationalism has grasped them and continues to refine them. The path of the European-based nations to wealth and prosperity is taken to be the template for a universal human pathway. The development concept, outlined in President Harry Truman’s inaugural address, imagined all countries on a single track, where front-runners like the United States would deploy “scientific advances and industrial progress” to help the “underdeveloped” expand their production and “catch up” to the West.
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Individualistic values, though highly specific to European-derived cultures since the Scientific Revolution, are thought by the people of these cultures to be universal, transcultural truths.

Modernity: A New Symbiosis

Over the past ten millennia or so, from the beginnings of agriculture until the advent of modernity, human history developed a “complex maze of reciprocal causation between environment and culture,” a “co-evolution,” in Norgaard’s words, something like the symbiotic relationship between species such as bees and flowering plants. The modern era progressively transformed this elaborate mosaic of “coevolved traditional farming systems” into a global economy based on large-scale technologies and market links.
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Instead of growing well-adapted food plants for local consumption, farmers now produce commodities for world markets and must adapt their choices to that market rather than to the strengths and weaknesses of their soil and climate.

For thousands of years, humans in local settings worked at improving the capture of the (solar) energy in their local ecosystems by strategies such as planting strains adapted to specific niches and mixing symbiotic crops to take maximum advantage of the agroecological setting. Industrial farming methods, on the other hand, can succeed with little or no regard for local conditions as long as plentiful energy and inputs of fertilizer and pesticide can be deployed. The exploitation of fossil energy was the key innovation that permitted these great material changes, launching a new “coevolution” between humans and fossil fuels that has supplanted the original symbiosis. This change occurred in both capitalist and communist societies, which have shared the technocratic and cornucopian assumptions associated with progress.
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The destruction of local economies appears rational (and often inevitable) from the viewpoint of Western social philosophy, which in Norgaard’s analysis “starts with the individual and leaps to the national and on to the global,”
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ignoring any intermediate levels such as the region or the local community group. This leap carries consequences for all kinds of groups, from families, communities, and others concerned about their local region to indigenous and cultural minorities, and for all types of collective organizations—academic, cultural, environmental, or political.

Choices made by such social units, right up to the level of the province, state and nation, are understood in the philosophy of economic liberalism as hindering individual freedom and erecting barriers to trade.
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The disputes of the World Trade Organization (WTO) are replete with cases where national preferences were disallowed on the grounds that they constituted unfair barriers to trade. For example, Australia’s wish to maintain rigorous quarantine provisions for raw salmon was challenged through the dispute mechanisms of the WTO, as was the right of Europeans to reject and exclude growth-promoting hormones in their meat.
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Oddly enough, one major group entity that permeates modern society is never delegitimized under the liberal rubric: the corporation escapes definition as a group entity and is treated as a species of individual, a legal “person.” Under US law, corporations have increasingly gained rights once limited to actual human beings. A corporate entity, however, does not represent an individual but the interests of a group—its shareholders, especially those with the controlling interest.

The modern focus on individual “choice” opposes individual interest to the common interest; social and environmental values expressed in intermediate group connections are negated, and the sense of common interest recognized in many traditional societies has withered. Norgaard, however, calls for development based on renewed coevolution, which embraces the rights of local people to determine their destinies in their local contexts and draws on the preindustrial model of communities in dynamic association with their local settings.
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Free Market Magic

When the World Bank’s chief economist criticized Daly’s approach to macroeconomic scale as simply “not the right way to look at it,” he was in step with the mainstream economists’ assumption that technological advance, alongside price signals that automatically attach to scarce items, will always allow for expansion and substitution. The “right way to look at it” assumes that physical limitations will always be surmounted by combining the fruits of human ingenuity with the magic of the free market. Economists very frequently claim that history “shows this to be true.” For example, economist Carl Kaysen argues:

Resources are properly measured in economic not physical terms. New land can be
created
by new investment, as when arid lands are irrigated, swamps drained, forests cleared. Similarly new mineral resources can be
created
by investment in exploration and discovery. These processes … have been going on steadily throughout human history [emphasis mine].
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While claims of ever-expanding horizons and steady growth may be supported by the evidence of the past few centuries, the longer prospect reveals many dead ends and regressions.
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Rapid change, whether social or technological, was unknown in pre-capitalist societies. Thus, while it is true that “new land” has been “created” throughout the history of human settlement—for example, as the vast boreal forests of Europe were cleared over several millennia and those of North America were subsequently cleared over a few centuries—and while land is still being “created” with the current clearing of the tropical forests of South America, Southeast Asia, and Africa over much shorter spans, it seems apposite to ask where the next wave of new land is to be created. Only tectonic activities are likely to create new land at this point. Economists like Kaysen stand squarely on a growth platform that recognizes no physical limitations. Investment is said to conjure any productive resource we may need.

Robert Solow argued that “if it is very easy to substitute other factors for natural resources … the world can, in effect get along without natural resources.… At some finite cost production can be freed of dependence on exhaustible resources altogether.”
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Solow went on to suggest that the prospects for easy substitution are highly favorable, embracing the peculiar possibility that we don’t really need natural resources.

The gulf between the assumptions of science and those of economics pervades the assessment of economic growth in the real world. In the next chapter, I turn to the scientists who challenged growth after World War II and the critical response to their work, largely from economists.

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The Limits to Growth Debate: Precursors and Beginnings

Anybody who believes exponential growth can go on forever in a finite world is either a madman or an economist.

—Kenneth Boulding, quoted by John Steinhart, 1973

Dawning Perceptions of Ecological Crisis

From the end of World War II until the beginning of the seventies, world economic growth exceeded anything ever before seen, with particularly explosive growth in Europe. Earlier growth, even in the nineteenth century, stood still by comparison.
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In the last decade of the twentieth century, the annual
increase
in world real GDP equaled something like the entire global economy of 1900, $1,000 billion in 1990 US dollars.
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The world’s economic output increased about twentyfold in the twentieth century and, according to the International Monetary Fund (IMF), “exceeded the cumulative total output for the preceding recorded human history.”
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It was the impact of this unprecedented economic expansion on the natural world that began to generate concerns in large sections of the scientific community, launching the twentieth-century debates about environmental quality and limits to growth.