Climate Change and the Limits of Economic Growth – FPIF – Foreign Policy In Focus

Since the nineteenth century, human society has experienced extraordinary but uneven economic growth thanks to the energy unleashed from fossil fuels. That growth, and the greenhouse gasses released from fossil-fuel use, has also created the current climate crisis. The conventional solution put forward to this crisis, a putative compromise between economic and environmental imperatives, has been to maintain economic growth but on the basis of sustainable energy sources.

Not all ecologists or economists are enthusiastic about this green growth alternative. According to these critical views, which have now begun to move into the mainstream, the planet simply cant sustain the current pace of growth and even renewable energy sources like solar hit up against significant resource limits. The only effective way to control carbon emissions, as well as related problems of pollution and biodiversity loss, is to address overshoot, the unconstrained use of energy and material resources well beyond planetary limits, particularly in the richer parts of the world. These arguments pick up from some of the earliest computer modeling of resource limits highlighted in the Club of Romes Limits to Growth report in 1972, but now with a climate crisis twist.

With the fiftieth anniversary of the Club of Rome report approaching, a number of scientists and economists gathered in early October to assess the current state of play of the zero-growth argument, its traction in the mainstream, and how best to call attention to the data supporting these positions. They looked at this question from various anglesphysics, geology, biology, economy, ecologyand discussed the major obstacles to greater acceptance of more critical approaches to economic growth as well as ways of overcoming these obstacles.

The main challenge remains how deeply wedded politicians, economists, and even the average person are to economic growth. Its often said that its easier for most people to imagine the end of civilization than the end of capitalism, and to imagine the end of capitalism than the end of growth, quips Joshua Farley, ecological economist at the University of Vermont.

The growth narrative has indeed created certain blind spots, geologist Simon Micheaux of the Geological Survey of Finland points out. Certain things just havent occurred to us to look at, let alone do the math. One is, understanding what energy does for us. The other is understanding where the raw materials come from. Much work over the years, including modeling around economic, environmental, and resource limits, has been designed in part to eliminate these blind spots.

Still, blind spots persist. They can be found, for instance, in the discourse around the Green New Deal. Most Green New Deal material Ive seen is just another formula for growth, York University economist Peter Victor notes. With sustainable development, we used to say that we have the adjective but they have the noun. I feel the same with green growth.

The modelers themselves are not immune from the growth imperative.

We need projects to survive as a research group, explains economist Jaime Nieto Vega of the University of Valladolid, adding that those projects require bigger and better modeling. Im increasingly convinced that we should keep the modeling simple, but the internal dynamics of academe are against that. Universidad del Rosario ecological economist Katharine Farrell similarly highlights the need to take into account the modelling implications of industrialization of scientific knowledge production with its fetishization of innovation that reproduces within academia the same growth dynamic in society as a whole.

In recent years, critiques of growth have been emerging from a number of different disciplines. Such an intellectual convergence is producing what might well become a paradigm shift. Its almost as if human consciousness is ready to see certain ideas, Simon Micheaux concludes hopefully. Our ideas might be received a little bit differently over the next couple of years.

Economics

Economics, on paper, is a discipline devoted to scarcity and trade-offs: budget constraints, resource limitations, the iron law of wages. As economists like to say, there is no such thing as a free lunch. Everything, in the end, must be paid for.

Economic growth at first glance seems to promise a shortcut out of this dismal world of scarcity by offering the promise of just such a free lunch, if not for everyone then at least for some. As economies grow, more goods and services become available, and the bounty seems to be conjured as if from thin air.

Economic growth, however, is not a conjuring trick. It has been powered by planetary resources, mostly fossil fuels. As University of British Columbia bio-ecologist William Rees points out, for most of human existence economic growth was barely detectable until the early nineteenth century when we got into the fossil fuel era. Fossil fuel for the first time gave humans access to other resources needed to grow the rest of infrastructure and human and manufactured capital that we find ourselves blessed with. In order to maintain that capital, we need to have a continuous supply of cheap energy.

The bill for a free lunch produced by fossil fuels is now coming due in the form of global warming, biodiversity decline, and various forms of pollution.

The strange thing is that economic growth, though it exerts such a powerful influence across societies of very different political economies, is often illusory. For much of the past 50 years, most Americans have experienced no economic growth, noincrease in consumption or level of wealth, Joshua Farley points out, because the benefits of economic growth have all flowed to the elite.

Yet most people dont want to give up on even this illusory sense of growth. Farley cites the 2006 review of the economics of climate change by the British economist Nicholas Stern, who noted at the time that it would require an outlay of one percent of global GDP to stabilize emissions at a level of 550 parts per million, which would substantially reduce the risk of climate catastrophe. At a time when GDP was growing 3 percent a year, such an expenditure would mean accepting a living standard of a mere five months in the past. But Stern believed that even such a modest cut would be a tough pill for the public to swallow, and he acknowledged that more ambitious efforts to reduce the risk of catastrophe, by for instance spending 2 percent of global GDP and accepting the living standards of the previous year, would meet with even greater public resistance.

Growth is not simply embedded in national discourses. It lies at the heart of the process known as globalization, namely the elimination of barriers to the transnational flow of trade and capital and the intensification of global supply chains. But globalization, as Peter Victor notes, is not inevitable: Globalization is built around capital mobility as the owners of capital seek better returns on their capital. It is allowed by policy, but there is also an opportunity to reduce capital mobility just as it was increased.

Such pushback against the assumptions of globalizationthat deregulation is essential, that growth is inevitablehas grown among economists.

This pushback, for Peter Victor, began with the idea that the economy is fully embedded in the biosphere and is fully dependent on it for all materials and energy and for all waste disposal. From this insight, he developed models for exploring the impact in Canada of a no-growth economy and a reduction of energy and material throughput. If GDP is stable, and youre getting efficiency gains, then youre reducing material and energy use, he explains. When he published his first modeling in 2007, you could put out scenarios that showed that the cessation of growth in Canada would meet many other important social and economic objectives: less work time, more leisure time, a reduction of income inequality and environmental impacts.

A second model, developed with ecological economist Tim Jackson, also incorporated the financial system. We could still get scenarios where growth would end and material and energy throughput would decline, but it was harder, Victor adds. I dont think thats a surprise. The window is definitely closing in terms of any reasonably smooth adjustment to the circumstances were facing.

Another hallmark of the current age of economic globalization is increased income inequality, both within countries and between countries. This polarization has been driven by the greater role played by finance in the global economy. The rate of return for financial capital is often greater than the economy as a whole, which effectively transfers even more wealth to those who possess capital in the first place. People are making money from money rather than from the production of goods. Some individuals and some countries are better positioned to prosper under such a system, which reinforces inequality.

I see the fundamental conflict of our age as the rich versus everyone else, Simon Micheaux argues. People with lots of money dont have empathy. The same ways of logic and problem-solving and appealing to a sense of right and wrong doesnt work with them.

Katharine Farrell calls attention to the social psychology work of biologist Mary E. Clark that the sociopathology of the profit-driven private corporation is well documented in psychological research. A corporation has to survive by showing profit and growing, Micheaux agrees. If a corporation cant grow, it loses investment, takes on debt, and goes down. They call this a free market like its a good thing. What do psychopaths do when they are fighting for their own survival? Do we expect them to play nice?

Economic Transition

The global economy is under a number of pressures: stagnation, the costs of climate change and other environmental impacts, the volatility that has accompanied income inequality. Crises have a way of bringing about unanticipated or unwanted changes, Peter Victor notes. But they happen. Think of the crisis European feudalism faced with the rise of the merchant class and later the industrial class. Feudalism gave way to capitalism not because Adam Smith wrote a great book but because the pressures were too great for feudalism to survive. There was a shift in the power balance. Now we have to recognize that capitalism is under stress.

One of those stresses is the availability of raw materials. Modern capitalism is based on relatively inexpensive fossil fuels and mineral wealth. That entire system is now under threat. This is an historic moment, Katharine Farrell points out. We are looking at the collapse of the physiological structures of the planet, such as weve been able to document them, during the small amount of time that weve been around to do so.

Another energy-related challenge for any transition away from fossil fuels is the relationship between energy efficiency and the reduction of energy demand thats imperative if humanity is to meet national and international carbon emission goals. We are finding that energy efficiency is not able to grow at the same scope as energy reduction when economic growth is a given, reports Jaime Nieto Vega, alluding to Jevons paradox according to which increased efficiency in resource use goes hand in hand with increased consumption of that resource. This is one of the main challenges of the energy transition plans in the EU and concretely in Spain.

There is more willingness among politicians to acknowledge the ongoing collapse of the existing system. Simon Micheaux describes a meeting he had with civil servants in Brussels. They were in an echo chamber, he remembers. It had not occurred to them to ask certain questions. I put together some information to demonstrate that our dependency on fossil fuels is a problem, fossil fuels are about to become unreliable, and the transition plan to move away from fossil fuel has not been thought out in a practical context. At a basic level, the planned rollout of electric cars and hydrogen fuel cell powered by solar and wind and hydro wont work. Weve run out of time, and we dont have the minerals in the ground. Even if we did find those minerals somehow by mining the sea floor, those systems are not strong enough to replace fossil fuels. I was met with shock. No one able to refute my work.

Such a meeting stood in contrast to his involvement in a civil society consultation at the G20 meeting in Melbourne in 2014. The finance ministers told us up front that if we couldnt help them achieve 2 percent growth annum indefinitely, we shouldnt bother coming, he recalls. When it became clear that we couldnt do that, that we would be tabling some very difficult challenges, they cut out the civil society documentation to go to the G20.

Joshua Farley agrees that the world is on the verge of transition. The heyday of neoliberalism is fading fast, he notes. My students are more open to alternatives to capitalism. Were reaching a point where the next stage is inevitable. People all around the world are coming up with the same ideas at the same time, just like Newton and Leibniz with calculus and Darwin and Wallace with evolution.

He continues, We are moving from a world in which individual choice and competition made sense to one in which collective choice and cooperation are necessary, not because ideologies have changed but because both the problems we face and the nature of the resources required to solve them have changed. When the costs of economic activity are collective, capitalism (i.e. private property rights and individual choice) is suicidal; when the benefits are collective (e.g. new vaccines for COVID, new forms of alternative energy), capitalism is inefficient.

William Rees remains cautious about this transitional period. If you believe the results of our eco-footprint and overshoot work, its not possible to support the present population indefinitely at average material standards, he points out. There are already resource shortages. To maintain the current structure requires the depletion of natural assets in the biosphere. According to our material flow analysis, half of the countries on earth are incapable of becoming even remotely self-reliant. Even China, which boasts of its huge pork production, relies on fodder grown in the United States, Brazil, and elsewhere. So, Chinas eco-footprint is all over planet. Theyre aware of it, at least implicitly. The Belt-and-Road Initiative is a strategy to ensure that China has access to resources all over earth. China has instructed its industrial sector and military to look for every drop of fossil fuel so that they can get in there first to maintain hegemony. Sustainability beyond mid-century will require a massive contraction of economic throughput by as much as 50 percent globally, which means 80 percent in rich countries on a per capita basis. Although modest by some estimation, are those figures realistic geopolitically?

Is capitalism, and the countries dedicated to it so firmly, going to fade away quietly? he asks. A dying dinosaur has a very dangerous tail that thrashes around. He points out that the world is not controlled by us thinking about ideas. Its controlled by big money and the politics that goes with it. The military-industrial complex is alive and thriving.

Part of any transition, then, is to minimize the influence of the beneficiaries of the dying system. None of us know what the new economy will look like or how to implement it, Joshua Farley says. But I advocate removing important parts, like essential resources, from the capitalist economy. That might be perceived as less of a threat to the global market. I still want to go into a store and choose the apple I want. Markets work okay for tastes but not for needs.

One such segment of the economy might be research. Ideas, information, knowledge, none of this should be rationed, yet capitalism tries to push knowledge production into a market framework, Peter Victor points out. If I can get free information from the Internet, I will do so. I dont consider it stealing. Its not like bread from the baker since if I take it, theres no less for anyone else.

Biology

Mainstream economists view humans as rational actors who maximize their gains according to self-interest. Billions of such rational actors have over the years made decisions to increase the overall pie as well as their portion of it. The biological counterpart of this economistic view is the selfish gene, by which humans will do everything within their power to maximize their advantages in order to improve their chances of reproducing themselves. Growing the economy and growing the species have thus been cast as going hand in hand.

Not everyone agrees. Since Richard Dawkins introduced his selfish gene argument, others have marshaled evidence for the biological basis of altruism. Love, compassion: these are characteristics of primates, Katharine Farrell notes, adding with a dash of understatement that even some humans have been seen to exhibit these characteristics.

Biology is not destiny, William Rees argues, but it certainly strongly influences human actions. The human species responds just as other species do when it finds itself in a resource trove, he explains. We go through rapid exponential growth until we either pollute ourselves into slowing down or deplete the assets that produced that growth. We are in the plague phase of a one-off population outbreak that will result in either slow implosion or rapid crash. Thats the choice ahead of us.

Biological limitations also shape the efficacy of human responses to the current crisis. We have a brain that evolved in simple circumstances: a small habitat and few people, Rees continues. We are not capable of dealing with complexity. We are natural reductionists. Echo chambers, disciplinary silosthat reflects our capacity to focus on one thing at a time and not much else. With every biological phenomenon there is diversity, but in the main, were not capable of understanding the complexity of the situation that we have created.

The heart of the problem, he adds, is not climate change per se. With the explosion of human numbers, weve put ourselves in a situation where simply maintaining the current population and infrastructure requires the depletion of natural capital assetssoils, forests, fisheries, he says. We are literally consuming the biophysical basis of our own existence. Climate change is a symptom of overshoot. Its a waste management issue, caused by carbon dioxide, the largest single waste product by weight of industrial economies. Biodiversity loss is a symptom of overshoot because human expansion necessarily displaces other species and their habitats. Gross pollution is the entropic result of growing the human enterprise.

Ordinarily, such species growth hits a wall. Species are usually held in check by negative feedback from the ecosystem in the form of disease or competition, he notes. Fossil fuel relieved us from that feedback, and we could express our full biological potential to expand. The cultural meme set of neoliberal economics has reinforced the biological disposition to expand.

Katharine Farrell, while largely in agreement with Rees, resists the notion that human nature is predetermined, by a selfish gene way or otherwise. She argues that its very difficult to get out of ones own orientation and disagrees with treating the culture of capitalism as an inherent feature of being human: industrialized capitalism, which has certainly achieved a memetic imposition on the culture of the planet, is not the natural or only option for the human being. We have to get out of the trap of the gendered state of evolution reflected in the Euro-descendent, post-medieval culture of capital accumulation that presently dominates globalized economic activity. Its not the only option we have.

Increasingly, humans have been behaving much like parasites, which Joshua Farley points out, constitute the overwhelming share of species on the planet. William Rees picks up on the theme. Humans have broken free of any ethical obligation to non-human species or even the future, he says. We have become effectively parasites on the planet. The growth of the human enterprisethe production of all our toys and goodies acquired at the expense of depleting the planet of other species, soil, waterhas had the entropic consequence of the parasitic destruction of our host species, which is the ecosystem.

It all comes down, Katharine Farrell agrees, to entropy, to the inevitable marriage between the production of order and disorder. We dont have an energy supply problem so much as an obsessive focus on finding energy sources. We have an overproduction of entropy, of waste heat and residuals that are inevitably produced whenever we do useful work, and this entropy production problem is reflected in biodiversity loss, habitat appropriation, and an explosion of invasive species, including agriculture.

Organization

What distinguishes humans from other creatures, Katharine Farrell points out, is not so much social interaction or organization, for ants and bees are highly organized creatures, but the creation of institutions. Ants are differentiated by their shapes: the queen versus the workers. Humans look more or less the same even as they take on different roles in social institutions.

These institutions, Peter Victor points out, mitigate to a certain degree the biological deficiencies inherent in any average individual.

We tend to be short-sighted, he admits. We are good at the local, not at the global. But part of the solution to that are the institutions we construct. When they work well, they can give us a longer time horizon, because they outlast the life of an individual. Unfortunately, a lot of the organizations that get set up with that spirit in mind can get overwhelmed and become short-term and concerned with the local. But if we re looking not only at how bad things are but how to get out of it, we have to look at changes at the organizational level to complement any discussion of our biological limitations.

Social segmentation and differentiation, mediated by these organizations, also counteract the individualism of the selfish gene and the rational self-interest of homo economicus. None of us has the ability to fully produce from scratch any item were in contact with right now, Joshua Farley points out. We are inherently a collective species. The individual cant survive away from the collective any more than a cell can survive apart from the body. Even the most trained survivalist, without a knowledge of local ecosystems developed through culture, is helpless.

One useful organizational innovation, Katharine Farrell notes, has been federalism, a method of handling complex hierarchical structures. The principle of subsidiarity is especially useful where differentiated systems dont try to do everything at one level but authority is taken at the most immediate or local possible level. Peter Victor also acknowledges the virtues of federalism: In Canada, where we have 10 provinces and three territories, we can learn from each other and be closer to politicians than in highly centralized Britain.

Human organization nevertheless has its downsides, depending on the nature of the organization. I wouldnt have forced someone to produce my shirt in an exploitative manner, Joshua Farley points out, but buying it through the capitalist system, I dont think twice about it. Organizations, through their complexity, thus offer individuals a kind of plausible deniability when it comes to unjust or unsustainable practices.

The structures of globalization, William Rees adds, have had a destructive effect on more sustainable forms of organization. Globalization has destroyed the capacity for community-level self-reliance or self-sufficiency. Now with global supply lines, everyone is utterly dependent on everyone else to survive let alone thrive. Unfortunately, that whole organizational structure presupposes abundant cheap energy to enable the global transport of goods around planet. If that system is coming to an end, we are going to be in a situation of forced reorganization, which wont be pleasant because it will result in increasing strife over the remaining pockets of assets around the world. Globalization has been the means by which the relatively well-to-do can access these remaining pockets. This huge organizational pump has sucked the planet dry and, in the process, impoverished much of the world.

But self-sufficiency can return, even under adverse conditions. Peter Victor enumerates a number of the survival tactics of countries under U.S. sanctions that have been forced, by their relative isolation from the global economy, to strengthen their food self-sufficiency or develop their own vaccines. Another example of this resistance is south-south cooperation where the Global South is trying to learn from itself and wean itself to some degree of dependence on the North, he points out. What can we learn from these examples?

Is versus Ought

Science attempts to describe the world as it is not as it should be.

Both quantitative and qualitative analyses are important, Peter Victor argues. A lot can be learned from number-crunching and from people playing with your models. But its not enough. It convinces those who are already convinced, and it raises questions with those who have open minds. Quantitative analysis gives us some insight into the choices we can make. But it doesnt tell us which one to take.

I believe in genetic evolution where the mechanism is genes as well as cultural evolution where the mechanism is our moral values, adds Joshua Farley. We need these values to live together as a group. These values are the units of inheritance upon which natural selection acts and they are every bit as scientific as genes. Were still obsessed in science with providing better numbers. No, we need to develop better ethical values that are compatible with society and its current scale. When I ask my students to distinguish between a good person and an evil person, they usually reply that an evil person puts the individual ahead of the group and a good person puts the group ahead of the individual. If we want to be a good species, we have to put the overall planet ahead of humans.

Katharine Farrell describes a meeting she attended where an indigenous woman from Canada and an indigenous man from Brazil discussed their perspectives on capitalism. The man talked mainly about brutality and violence and a lack of regard for the other, the lack of reciprocity in terms of economic framing. The woman talked more about cultural complexity, that sense of responsibility, how do we raise and teach our children. I was left with a metaphor: capitalism is an adolescent male who didnt spend enough time with his mother. Its a vulgar oversimplification of the problem, but theres a lot in it. We need a more neurocognitively complex approach to knowledge production that includes and exploits both the masculine and feminine aspects of the human brain.

Im not suggesting that the memetic theme were now embedded in is the only one, William Rees counters. But the one we have happens to reinforce the biological theme. The whole of civilization is a set of rules and regulations established to override what would naturally happen. We are in the game of recreating the paradigmatic framework with which we move forward and much of that will have to counteract our natural predispositions.

Impact

Given the centrality of economic growth in the mainstream, degrowth has largely hovered on the margins of debate. That seems to be changing.

I noticed a shift in mood two or three years ago, reports Simon Micheaux. Instead of hitting my head against the wall, all of a sudden I started to get results. Im not sure how this happened, but now Im getting my work in front of senior policy decisionmakers. Im presenting to ministers and parliaments in multiple countries.

But, he cautions, that hasnt yet translated into altered policies, either at a political level or even in terms of technological research. The best and brightest are working on things that, I wont say they wont work, they do work, but they are not the ultimate solution. We are forced to work on lithium-ion battery chemistry when there are other chemistries. Ive shown that there are not enough minerals in the ground to make those batteries. Ive used their data. They have no choice but to see it.

When a financial crisis happens or a sympathetic political party takes power, the terms of reception can change dramatically. Peter Victor remembers when a social democratic government took over in Ontario after a surprise election result in 1991. I was given a job there, and just being able to work with a government that was interested in social change was incredible, he says. You couldnt give them enough ideas! They didnt accept them all, but they listened.

Fifteen years later it was a crisis that gave his ideas more prominence. My book Managing Without Growth came out in 2008 at the time of the financial crisis, he recalls. What otherwise would have been a marginal document published by an academic publisher and sold at a high price became more well-known. The media was looking for an economist who could say something positive about no-growth. I was invited all over the world. I got a sense that I was being listened to. But 99 percent of the time, the audience already agreed with me.

Victor adds, It takes a chorus. If lots of us do these things, it will make an impact.

Degrowth is often associated with doom-and-gloom scenarios. No one wants to hear that everything is going to go poorly, Simon Micheaux notes. They want a solution. If you cant promote a solution, they are not prepared to hear the problem. As the economist Herman Daly used to say, If youre falling out an airplane, its not an altimeter you need but a parachute.

Finland, Micheaux continues, sits on a lot of minerals integral to battery production such as cobalt, nickel, lithium, and graphite. If Im right, in a few years time, the global production of minerals will not be sufficient to meet demand. The captains of industry will then turn to the geological surveys in Europe and say, why didnt you tell us? The Geological Survey of Finland (GDK) manages a battery portfolio and they will be first in the firing line. I can have a frank discussion with their executive board members about hyperinflation, peak oil, currency default. They are enlightened, but they dont understand the implications. Still, GDK is giving him the opportunity to develop his ideas about the circular economy and cooperate with other Finnish research groups in the industrial sectors.

Its pretty clear that we dont have enough resources to go around, Micheaux concludes. If we do the conventional, each nation for itself, it will give war a chance until the population reduces. If we actually have a transparency of information and we all agree to share those resources, well have a form of socialism to distribute those resources and a form of capitalism to exploit those resources.

To help generate and test new ideas, Joshua Farley recommends creating a knowledge commons. Any university can unilaterally declare that all the knowledge we create to address social ecological problems is freely available to all on the condition that any improvements to it are also freely available to all, he suggests. Even geopolitical rivals like the United States, Iran, and North Korea could be part of this commons. Small-scale knowledge commons, like this working group, can provide help in developing certain ideas and marshalling the defense of such ideas in the public sphere.

This effort could include the creation of a social platform to rival Facebook based not on pushing people to buy more thingsand offering polarizing content to keep people tuned inbut on algorithms that reduce political polarization and focus people on common problems, Farley adds.

Another idea Farley suggests is secure sufficiency. Meeting peoples basic needs is the ultimate form of freedom. If they are not worried about becoming unemployed or suffering a health emergency that they cant afford to cover, they might not strive so hard to accumulate wealth or be quite so wedded to a growth economy.

The working group agreed to pool its experience of what works in terms of injecting no-growth arguments and modeling into the mainstream. And the group is considering efforts to work with organizations devoted to qualitatively expressed no-growth visions like well-being and buen vivir, and to challenge competing modeling based on overly optimistic assumptions about technological advances.

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Climate Change and the Limits of Economic Growth - FPIF - Foreign Policy In Focus