Building a Sustainable Economy in a World of Finite Resources

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* Book: Enough is Enough: Building a Sustainable Economy in a World of Finite Resources by Rob Dietz and Dan O'Neill (Berrett-Koehler, 2013).



by Rob Dietz and Dan O'Neill:

"To appreciate why an economy based on enough is worth striving for, it is useful to examine the failings of an economy that forever chases more. It’s no secret that the dominant economic philosophy of modernity is more—more people and more production, more money and more consumption. Employees try to earn more income, business managers try to report more revenue on the balance sheet, and politicians try to ensure that the economy churns out more goods and services. On the surface, more seems like a good idea. For an employee, more money can mean financial security; for a business manager, more revenue can result in a promotion; and for a politician, more national income can generate votes in the next election. But if you dig beneath the surface, you begin to uncover the fatal flaws of more.

The main problem with pursuing never-ending growth stems from the fact that the economy is a subsystem of the biosphere. All of the inputs to the economy come from the environment, and all of the wastes produced by it return to the environment. As the economy expands, it consumes more materials and energy, and emits more wastes. But since we live on a finite planet, this process can’t go on forever. Like an inner tube inside a tire, the subsystem can only grow so large compared to the system that contains it.

The size of the economy is typically measured using gross domestic product (GDP). GDP is the total amount of money spent on all final goods and services produced within a country over the course of a year. Since one person’s spending is another person’s income, GDP is also the total income of everyone in the country. GDP functions as an indicator of the overall level of economic activity—of money changing hands. Economic growth, as reported in the media at least, refers to GDP growth, which is equivalent to an increase in the amount of money changing hands.

A helpful place to turn for a long-term perspective on GDP growth is the work of economic historian Angus Maddison. During his distinguished career, Maddison compiled a remarkable data series on population and GDP starting in the year 1 c.e. and running to 2008.

For most of human history, the size of the economy was small compared to the size of the biosphere. But over the last hundred years or so, this balance has changed remarkably owing to the increase in the number of people in the world and the growth in each person’s consumption of goods and services.

Between 1900 and 2008, world population increased from 1.5 billion to 6.8 billion people—more than a factor-of-four increase. At the same time, GDP per capita increased from $1,260 to $7,600—a factor-of-six increase. The result is that world GDP increased by an astounding factor of more than twenty-five over the last century, from about $2 trillion to $51 trillion (and this is after adjusting for inflation).

On its own, an increase in GDP would not be a problem, except that economic activity is tied very closely to energy and resource use. As GDP increases, the economy requires more energy and resources, and produces more wastes. While Maddison’s work provides a picture of the phenomenal growth of GDP, the work of ecological economists provides a picture of the growth in material and energy use that has accompanied it. As a result of GDP growth, humanity now uses eleven times as much energy, and eight times the weight of material resources every year as it did only a century ago. And most of this increase has occurred in the last fifty years.

The connection between GDP and the use of materials and energy raises a subtle but important point. When we discuss “economic growth” in this book, what we’re really concerned with is not GDP growth per se, but the increase in material and energy use that comes with GDP growth. Ultimately, the flow of materials and energy is what impacts ecosystems, not the exchange of dollars and cents (although the latter drives the process).

What is the environmental upshot of this growth? Plenty of evidence suggests that the global economy is now so large that it is undermining the natural systems on which it depends. This evidence presents itself as a wide range of global environmental problems: climate change, biodiversity loss, stratospheric ozone depletion, deforestation, soil degradation, collapsed fisheries—the list goes on.

In a landmark study published in 2009, Johan Rockström and his colleagues at the Stockholm Resilience Centre showed that the economy is placing an excessive burden on the biosphere. In reaching their conclusion, the researchers analyzed nine planetary processes that profoundly influence life on earth:

1. Climate change

2. Biodiversity loss

3. Nitrogen and phosphorus cycles

4. Stratospheric ozone depletion

5. Ocean acidification

6. Global freshwater use

7. Changes in land use

8. Atmospheric aerosol loading

9. Chemical pollution

Where sufficient data allowed, the authors of the study determined how far humanity could go in altering these processes and still avoid dangerous levels of disruption. They were able to define “safe operating boundaries” for the first seven processes in the list above. A safe operating boundary is a sort of safety threshold—stay below it, and humanity incurs a low risk of abrupt and hazardous environmental change; go beyond it, and humanity faces a high risk. For three of the planetary processes (climate change, biodiversity loss, and the nitrogen cycle), humanity is now exceeding the planet’s safe operating boundary, and by a large margin in some cases. The potential consequences are severe: the authors warn that transgressing one or more of the planetary boundaries could lead to catastrophic changes at the continental to planetary scale.

Other analyses, such as those conducted by the Global Footprint Network, corroborate the Rockström study. The ecological footprint is a measure of how much biologically productive land and water area a population requires to produce the resources it consumes and absorb the wastes it generates. According to the latest data, humanity uses 50 percent more resources than the earth can regenerate over the course of the year. This situation is called “ecological overshoot,” and it’s akin to living in debt. We can only continue to consume at our current rate by liquidating the planet’s natural resources or overwhelming its waste absorption capacities. For example, we can cut forests faster than they can grow back and emit carbon dioxide faster than it can be absorbed by oceans and forests. Although we can behave in this way for a short time, ecological overshoot ultimately depletes the resources on which our economies and societies depend.

Indicators like the ecological footprint and scientific analyses like the planetary boundaries study suggest that the global economy has become too large for the encompassing biosphere. So long as this situation continues, we are risking environmental catastrophe. Even if we manage to avoid environmental collapse, the steady depletion of resources threatens to reduce the long-term carrying capacity of the planet, and with it the capability of future generations to flourish.

This unsettling state of affairs is causing some well-known advocates of economic growth to question their long-held views. Robert Solow, who won the Nobel Prize in economics in 1987 for his theories on economic growth, has said, “It is possible that the United States and Europe will find that, as the decades go by, either continued growth will be too destructive to the environment and they are too dependent on scarce natural resources, or that they would rather use increasing productivity in the form of leisure.” Economic journalist Thomas Friedman questions growth further. He asks, “What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall—when Mother Nature and the market both said: ‘No more.’” (