In 1972 the book Limits to Growth was published. This year, forty years later, the book The End of Growth came out. The first book emerged from the elite think tank the Club of Rome; the second comes from Jeff Rubin, past chief economist for CIBC. Others, writers like Herman Daly, have long written about the need to move to a steady state economy which doesn’t destroy the planet for short-term economic gain.
Pushed by a deepening awakening that we can’t continue “business as usual”, the worldwide environmental movement has tried to get government and industry to recognize that there can’t be endless growth without undercutting the biodiversity that society and the economy depend upon. Mega-projects have come under more scrutiny but it has remained much the same.
The UN established the World Commission on Environment and Development. In 1987 it issued its watershed report advocating “sustainable development”, changing how we do things today so that future generations can meet their needs. This appeal to inter-generational justice went beyond social justice. However, due to the accelerating globalization of lucrative markets it was only a few years before the term “sustainability” got twisted to mean “sustaining the profit-driven corporate economy”.
Globalization seemed to be unstoppable until the financial crash of 2008 and the recessions that have ensued. Are we finally getting ready to collectively re-evaluate economic growth?
THE 2008 CRASH
The conventional view of the 2008 crash is that there was insufficient backing for the massive debt-load in the expanding housing market. Home-purchasers were taking out higher and longer mortgages for ever-higher priced houses without sufficient earning-power to back them up. Implicitly we blamed working people who were caught between a rock and a hard place by the real estate market and the banks. There is understandably widespread resent that after a massive taxpayer bailout, banks continue to make billions.
Rubin sees it differently, saying “soaring oil prices” spurred on by the hike in interest rates “pricked the housing bubble.” For him, “higher energy prices aren’t a symptom of our economic problems – they’re the cause”. “Oil powers economic growth”, and as Rubin reminds us, “each year the global economy needs more barrels of oil”. If the price of oil rises too high then growth gets cut back.
WAR AND ECOCIDE
Pressure to get more oil on the market has played a major role in recent warzones and environmental crises. Military interventions in the Middle East, starting with the 1st Gulf War, involved security of supply for oil-addicted America. So did the steady deregulation leading to BP’s gigantic spill in the Gulf of Mexico and the ongoing assault on eco-systems from Alberta’s tarsands.
Demand for more oil also contributed to pressure to expand nuclear power to free up more oil for transporting goods in the globalizing market. However, the Fukushima disaster has stalled the nuclear industry, making economic growth even more dependent on oil and other fossil fuels.
Rubin turns this co-dependency of oil and growth on its head, arguing that “energy scarcity could become the environment’s best friend.” Without cheap oil there can’t be unlimited growth, which will reduce carbon and other pollutants. He doesn’t accept that we can have our cake and eat it too. There won’t be a tech fix, like energy efficiency or a revolution in cheap renewables that will allow economic growth to continue without a huge ecological cost.
Amory Lovins’ work shows that we can decouple energy growth from economic growth, but the whole world can’t sustain energy usage on the scale that accomplished European and North American colonial development. However, while China’s boom has it on a par with the US as the largest global carbon polluter, on a per capita basis it hasn’t been anything like the West. I keep reminding people that Saskatchewan’s per capita footprint is 70 tonnes; China’s was 7 in 2011.
Rubin goes to great lengths to show that as oil prices quadrupled, economies deteriorated. Deficits and unemployment have both grown, which he suggests shows that the compulsive drive for more oil and growth is a major “misdiagnosis”. The policies of both the conventional left and right are both misguided; neither fiscal stimulus nor austerity linked to monetary demands can “substitute for cheap oil.”
Conventional economics calculates supply, demand and price as if the economy is separate from the environment. This is delusional, but it has taken the environmental crisis, and particularly the climate crisis, to challenge us to get it right. Humans with vested economic, political or ideological interests can be stubborn; so in spite of the accelerating climate and economic crisis, those in the corporate board rooms and the cabinet offices are still trying to do “business as usual”. Rubin says they will fail!
THE GRAND DELUSION
Politicians “chasing re-election” are hooked on the delusion that extracting more fossil fuels can continue to drive economic growth and job creation. They have failed to understand basic causation. It was cheap energy, mostly oil, often extracted forcibly through neo-colonial industrialization that fueled post-WW II economic growth. With escalating energy prices and the hopeful democratization of oil-exporting countries, that era is over. If we want to protect the natural environment, avert catastrophic climate change and see the burgeoning human population get basic needs met, we’ll have to reduce what Rubin calls the “economic speed limit”. More fairly distributing basic goods and services, not creating even more billionaires at the expense of the planet, is what is now required.
Rubin’s analysis is convincing. Economic growth and demand for more energy are entwined. For four decades recessions have followed spiking oil prices. After the 2008 financial crash and the global downturn, “global oil demand actually fell for the first time since 1983”. Previously, since the 1970s, geo-political shocks in Middle East oil supply led to short-term recessions. Things have escalated. In 2004 oil was trading at $30 a barrel; four years later it was peaking at $147. This speedy quadrupling of price slowed economic activity and some began to envisage world depression.
Inflation rose as oil prices escalated. Predictably central banks increased interest rates. The five-fold rise in US interest rates from 2004 to 2006 was too much for the speculative housing market and the bubble burst. The global financial house of cards collapsed. After that, in an energy craving economy, global prices for food continued to rise; they are now 40% higher than after the 2008 crash. Some stimulus packages tried to encourage a shift from fossil fuels, though not in Canada, where Harper is further locking us into oil-dependent growth. Ill-conceived stimulus mostly backfired into greater public debt. Austerity budgets have been on the backs of ordinary people already struggling.
The globalized economy creates massive collateral damage. Big investors still make money while ordinary people can lose life savings and risk losing jobs and homes. Meanwhile, without diagnosing the problems accurately, governments, most notably the Harper government, try to reestablish economic growth based on ever-increasing and costly oil consumption.
It is time for a fundamental rethink of how we got into and how we’ll get out of our mess. The environmental crisis is mostly a result of an economic system which takes the planet for granted and to “save the environment” we’ll have to retool the economy. Are we up to it? Is there the political will to finally take this on? Do we really have any practical alternative?
Next time I will discuss why hitching our economic wagon to China’s authoritarian economy won’t move us towards sustainability.