View source for Juliet Schor on the Two Types of Economic Growth



=Discussion=

Juliet Schor:

==[[Juliet Schor on the Two Types of Economic Growth]]==

"We need to unpack the idea of
growth. This overused term lumps together two very different dynamics,
only one of which is really expansion. Intensive growth means using
a fixed set of resources with greater efficiency. This productivity
growth is rightly understood as the cornerstone of economic progress.
As we begin to produce more sustainably, it’ll be because we make
technological and other changes that yield efficiencies in the use of
natural capital. A shift to organic and local agriculture, passive solar
homes, wind power, and other forms of renewable energy will result
in genuine productivity increases. Other true efficiencies can be had
through information technology and enhanced human capital. To
the extent that this kind of growth occurs, it will indeed provide opportunity
and real wealth.

But most of the time when people (and economists) use the word
growth, they are also referring to the process of pulling in new factors
of production, or what’s called extensive growth. It is so named because
it extends the scope of the market, or capitalist, sector, as it replaces
public, household, or other types of production. Gross national product
and other measures of output and income conflate intensive and
extensive growth. But the extensive type is not really growth. It’s a
shift of resources from one economy to another, or the use of a nonrenewable
asset. Drawdowns of capital from the natural world to the
market economy (e.g., felling timber, mining, overfishing, and using
fossil fuels) are one example. If enough extensive growth occurs, the
economies from which those resources are drawn become depleted
or, if the process goes far enough, devastated. Eventually, extensive
growth starts to become less profitable because the assets being used
up get scarcer. It can eventually lead to blowback, which is now happening
with the climate system, oceans, and forests.

While the standard account of economic development stresses
factors such as human ingenuity, education, and physical capital, that
view is beginning to be challenged by environmental historians and
social ecologists. Some historians now argue that much of the growth
of the industrial period has been of this extensive type, made possible
by tapping into fossil fuel sources. We’ve long been aware that the
industrial revolution depended on coal. What we haven’t done is
work through the implications of that for the post-carbon era. Bill
McKibben has put the point powerfully: “Fossil fuels were a one-time
gift that underwrote a one-time binge of growth.”

The point is also true for other natural resources. Beginning in
the sixteenth century, Europe and Asia deforested in order to grow,
and resource depletion has been ongoing since then. Over the last
few decades, a significant fraction of market expansion has occurred
through running down ecosystems. The first national study to assess
the extent of the overstatement of growth was done for the 1970s and
’80s for Indonesia, and found that half its measured gross domestic
product growth disappeared once timber, oil, and soil depletion was
factored in. The situation is even starker in China, where torrid
growth has created environmental and social havoc. Studies of environmental
degradation have found that Chinese GDP was overstated
by 8 to 13 percent in the 1990s, and suggest the figure may have
grown to as much as 25 percent now. U.S. consumption, fueled by
Chinese exports, has become reliant on these drawdowns from nature.
A recent estimate of the value lost on a worldwide basis to deforestation
alone puts it at $2 trillion to $5 trillion a year."
(from the book, Plenitude: [[New Economics of True Wealth]]


[[Category:Commons Economics]]

[[Category:Economics]]

[[Category:Articles]]