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Have we entered the era of 'de-growth'?
The financial woes of 2008-9 are expected to be minor compared to 2012 and beyond. My understanding of the state of global finances, based on discussion with people who understand the economy, combined with my knowledge of resources, food production, technology and climate change, leads me to conclude that we are on the cusp of ‘peak growth’.
I am told that the default of several Euro-zone countries on their debt, and the collapse of the Euro, is inevitable. Too many countries have borrowed far more than they can repay and the wealthier countries cannot cover the losses. Someone (sorry I forget who) likened it to going out to a restaurant with friends and eating more than you can pay for. So what do you do when the bill arrives? Order more food!
For an informed economic perspective please read Philip Lawn's earlier post, who describes the relationship between economy and resources thus:
“The economy is a subsystem of a finite, non-growing ecosphere (Earth). The relationship between the economy and ecosphere is akin to one between a parasite and its non-growing host. Since the former cannot outgrow the latter, continued growth of the economy or continued growth of real GDP is biophysically limited irrespective of whether the growth is ‘economic’ or ‘uneconomic’.”
The financial crisis in Europe will spread to North America, Japan, South Korea and around the globe. China will be a key player because it holds so much debt in the form of American bonds and loans to Europe. It is impossible to predict how all this will play out, except that ‘recession’ and then ‘depression’ will be the result.
The historical way of battling out of recession is investment in consumption and growth. But investment requires confidence, and real growth requires energy and resources. The World has reached peak oil production and many other key resources such as fertilisers and metals are heading for peak production for two major reasons:
We have cherry-picked the best resources and from here on, it gets much tougher.
Now add to the mix increasing cases of extreme weather events such as drought, flooding and storms. These will hit food production and will cost money to rebuild damaged infrastructure. Population growth and immigration will make further demands on finite resources to build new infrastructure.
In poor countries there will likely be more unrest as people go hungry, and in rich countries more unrest as jobs, people’s spending power and pensions decline. More unrest means lower productivity and more conflict between neighbours.
I have previously made the case that we are already constrained by resources here and here. I have also argued that alternative energy sources cannot maintain the current lifestyle despite hopes to the contrary, Moreover, we must be concerned that food production is seriously threatened.
So when I refer to ‘peak growth’ I mean that material wealth production per person is set to decline now, and absolute or total material wealth will decline in the longer term.
This analysis is not intended to be pessimistic or morose.
Quite the opposite! For one thing, carbon dioxide emissions might increase more slowly. Crises will help to force more realistic ambitions and changes in values. People will come to realise very quickly that continued consumption and materialism is neither possible nor desirable.
Whereas ‘recession’ and ‘depression’ are negative terms, I see ‘de-growth’ or ‘deconsumption’ as really positive.
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