End of Economic Growth

It is commonly said that we cannot have infinite growth on a finite planet. This this is clearly understood, at least intellectually, by most people. The implications and consequences, however, are often ignored. On the one hand, we have physical limits imposed by the planet that prevent infinite expansion, and on the other we have only a finite amount of resources, especially energy, without which continued growth cannot be maintained.

Our current economic system, which is primarily measured in terms of GDP, depends on continual growth, year after year, over time. There can be temporary periods of economic contraction, which are called recessions or depressions, and are something to be avoided as much as possible. Interestingly, contraction is often referred to as "negative growth", which reinforces the idea of how much the idea of "growth" is implicit within the system. Other than these temporary setbacks though, for the system to survive, a long term trend of increasing growth is required.

GDP (Gross Domestic Product) is the standard measure of overall economic activity. That is, the amount of goods produced, the amount of construction and infrastructure built, and the amount of services provided. It usually doesn't take into consideration any external factors such as pollution, carbon emissions, or other environmental or human impacts. This means that a coal mining operation is much more "productive" than conservation, for example. Conservation means reducing GDP, which benefits the environment, but lowers economic activity.

Another example would be the Iraq war. Massive construction and private security services have been extremely "productive" economically (for the US). The war has resulted in many human deaths and the destruction of infrastructure in Iraq. However, not only is the rebuilding of infrastructure productive, much of this is being destroyed continually, which means it must be continually rebuilt, which makes it even more "productive" for construction companies operating in Iraq, and this raises GDP.

The point here is that GDP is not a measurement of health, happiness, or sustainability, it is merely a measurement of the intensity and scope of economic activity. It is up to humans to make a value judgement about what economic activity is beneficial and which is detrimental. Ironically, GDP measurements also fail to take into account economic activities that can reduce the potential for future economic productivity.

This is similar to the idea of human carrying capacity. We also have, essentially, an economic carrying capacity as well. Just as we are drawing down ecological capital, in the case of human carrying capacity, we are drawing down our economic capital as well. In fact, in many ways, ecological capital is economic capital. With less arable land, less farming is possible, with ocean acidification and species loss, we have less fishing, with rising sea levels, we also have less productive land. These are all economic activities that are being curtailed by our present economic activity. By using our renewable resources faster than they can replenish themselves, we are drawing down our future capital.

Another area where this is even more obvious is with the use of non-renewable resources. We are at, or close to, the point of peak oil. This means that going forward, there will be a bit less oil available every year than the year before. Other energy resources, and some types of rare metals, are also nearing peak. This doesn't mean we run out, but with declining resources, economic activity cannot expand, indeed it will need to contract. The faster we use these resources today, the less will be available as inputs to economic activity tomorrow.

The planet started off, before humans, with a massive amount of resources, both renewable and non-renewable. Especially during the past hundred years, we have been exponentially increasing our use and consumption of these resources. This has been the engine behind 100 years of economic growth. But this is not return on investment. We are draining our bank account, essentially drawing down principal, not living off the interest. This is why our current level economic activity is not sustainable, let alone future growth.