"Towards a Sustainable Economy",
by F.E. (Ted) Trainer (1996)
THE 'LIMITS TO GROWTH' movement which has developed over the last three decades is based on the argument that the way of life in rich countries is unsustainable, primarily because it involves huge resource and environmental costs. The pursuit of more affluent living standards and more economic growth is now the major cause of several serious global problems, including environmental destruction, Third World deprivation, conflict, and resource scarcity. The solution must be to shift eventually to a zero-growth economy on much lower resource use and GNP per capita than we have in the few overdeveloped countries.
This view clashes head on with conventional economic thinking, which is entirely built on the assumption that endless economic growth is without question possible, desirable and very important. There is no concept of any limits or point at which there has been sufficient development, nor is there any concept of overdevelopment. It is simply assumed that economic output can and should go on increasing as fast as possible for ever.
Here are the main themes in the limits to growth view of our global situation.
Our way of life is extremely expensive in terms of resources, energy and the environment. We are obliged to use up huge quantities of non-renewable resources. US energy consumption averages the equivalent of 12 tonnes of coal per person per year, 6 times the world average and 30 times the average for the poorest half of the world's people.
Some of the most persuasive limits to growth arguments concern the huge amount of travel and transport that take place in our present society. Goods are shipped around the world, people travel to work and go long distances for holidays, and food is transported a long way to where it is consumed. The average amount of road transport per person in Australia is more than 9000 km every year. There is no realistic possibility of keeping up anything like this amount of transport when oil runs short as is most likely in a few decades time.
Economists often give the misleading impression that resource availability depends mainly on the price we are prepared to pay, so that resource scarcity can be overcome if price and demand rise. In the short term there is a tendency for this to happen, but the important limits to the availability of resources are biological and geological. Changes in the price of oil, for instance, make no difference to the amount that exists in recoverable form within the ground. Approximately fifty estimates have been made of the total amount of potentially recoverable oil deposits and the median of these is around 2000 billion barrels. This would only last about 10 years if everyone in the world today used it at the US per capita average.
Only a very small proportion of the minerals existing in the earth’s crust has been concentrated into ore deposits, probably less than 0.1 per cent, and the rest exist thinly, and mostly in the form of silicates. To extract a kg of metal from its richest occurrence in silicates would take 10 to 100 times as much energy as to extract it from the poorest ore deposit. This cost will be prohibitive given our energy situation.(1) Estimates of the potentially recoverable mineral and energy resources available in ore deposits have become available since the early 1970s. These cannot be taken as very reliable but they provide a useful reference point for thinking about how sustainable our resource-expensive way of life might be. If we assume 10 per cent of the ore deposits (a) will be found, (b) will have ore rich enough to mine, (c) will be big enough to warrant building a mine, and (d) are accessible for mining, most of the mineral resource items would be exhausted quickly if all the people likely to be on earth after 2050 (11 billion) were to use them at the present rich world per capita rate.(2) Of the basic 28 minerals, 12 would be exhausted in under 40 years, including copper, tin, lead, gold, mercury, silver and zinc.
These conclusions refer to all deposits in the crust to a depth of 4.6 km. The geological processes that form mineral deposits tend to occur mostly within the top few kilometres of the crust. In addition the difficulty of finding and mining deposits increase with depth, due to heat and faults in the rocks, for example. Thus in practice it is not likely that much mining will be carried out at greater than 2 km depth. Indeed if the most plausible assumptions are made regarding the above factors limiting the proportion of deposits likely to be accessible, only around 2 per cent of them - rather than 10 per cent - would be retrieved. Eighteen items would then be exhausted in less than 30 years.
In the one hundred years to 1970, costs of minerals continually fell. Whether that trend has ceased now is debated.(3) However, trends in dollar costs can be quite misleading indicators of real scarcity. For example the price of oil has fallen since the early 1980s, but oil is in fact becoming more scarce, and there will probably be little left by 2040. Similarly, present trends in the price of rainforest timber give no indication that by 2040 there will probably be none of that left either.
Much more important than the dollar costs per unit of mineral produced are the energy costs, and the capital costs. These have been increasing for some time and are likely to accelerate. The long-term energy cost of producing minerals and energy has been rising at 2-3 per cent p.a. and is likely to go on so.(4) At rate the energy cost of a tonne will double every 30 years or so, indicating that technical advance is not making these items more abundantly available as time goes by.
It is sometimes assumed that resource scarcity will not hinder economic growth because from here on the growth will mostly take place in the service sector. However, services use surprising quantities of materials and energy, for offices, lighting etc. Some of the biggest service industries are transport, tourism and travel; very energy intensive activities. Many service industries deal with material goods, such as insurance, advertising, transport, and retailing. Even if they used no material resources once they are established, growth in the number of service firms in existence would involve growth in the resources required for construction and equipment. Let us assume that from here on economic growth of 3 per cent p.a. takes place but it is all within the service sector. By 2060 the service sector would make up 96 per cent of the total economy and would be 12 times as big as it is now! It is not plausible that an economy churning out 8 times as much as at present would not have a much greater resource throughput than now.
It is sometimes argued that we could continue to pursue economic growth if we changed to a sensible definition of it; in other words, if we defined the GNP or overall economic welfare in a way that reliably reflected real economic costs and benefits. Such an index might subtract expenditure that had to be devoted to cleaning up pollution, and it might take into account the real benefits associated with improving the friendliness, security and cultural tone of our living places. Could we not constantly and ceaselessly increase the 'production and consumption' of knowledge, courses, personal development, conviviality and satisfying life experience?
We obviously do need more sensible measures of overall economic wealth or welfare, but none of us can change the crucial fact about our present economic system. It must have constant and limitless growth in GNP as this is now defined, i.e. production for sale. Unless dollar and pound turnover and returns on investment increase all the time and create more and more profitable investment outlets for all that ever-accumulating capital there is serious trouble in this economy.
The resource hunts seem to be even clearer with respect to energy. The most common estimates of the potentially recoverable energy resources seem to be (in tonnes of coal equivalent): coal 1000 billion, oil 315 billion, gas 500 billion, shale oil 200 billion, uranium 160 billion.(5) Even if we double the coal figure, and if all the people the world is likely to have in 2060 were to use energy at the per capita rate people in rich countries average today, this total volume of energy would be completely exhausted in a mere 20 years.
Those who wish to argue that the energy problem can be solved by nuclear energy should realise that 250,000 giant reactors would be needed, 1000 times the world's present nuclear capacity. They would have to be breeder reactors until fusion became viable (and it might not be viable), meaning 1 million tonnes of Plutonium in constant use!
Nor should it be assumed that all we have to do is simply change from fossil fuels to renewable energy sources like the sun and the wind. These are sources we will all live well on one day but we will almost certainly do so only at very frugal levels of energy use, because they are very difficult and costly to collect and store.
The biggest problems for renewable energy sources concern the provision of electricity and liquid fuels. Impressive figures for solar and wind energy are often cited, but these refer to the best experimental sites and do not take into account the very high storage and transport costs and losses that would be associated with attempting to base current rich world living standards on renewable energy sources. Most rich world people live in high latitudes. If Europe's winter electricity demand were to be supplied by solar plants located in Northern Africa and pumping hydrogen to Europe, then approximately 95 per cent of the energy collected would be lost in conversion, storage, or transmission. (For a detailed explanation, see The Conserver Society, Chapter 9.) At present-day photovoltaic cell, efficiencies (13 per cent in the field) and costs (A$500/m2 wholesale), the cost of the 200 million m2 of cells for a power system supplying 1000 MW in Europe would be A$ 100 billion. This 40 times the cost of a coal fired plant plus coal for 20 years. (At 20% efficiency and A$200/m2 optimistic but possible future figures, the cost, of the cells would be $22.2 billion, around 10 times the cost of a coal fired power station.) Note that these figures do not take into account the cost of operation, maintenance, insurance, profits and interest payments on the capital that would have to be borrowed. These items might double the above cost for the cells. Industrialised economies could not survive anything like this multiple of the present cost of electricity.
It also appears that rich countries, especially Australia and many in Europe, will be unlikely to derive more than a small proportion of their electricity from the wind, both because of the lack of sites with good wind that have not been taken for other purposes, and the unreliability of the winds. There is always a chance that most of the mills will not be turning at a given time, so there is always a need for many power stations of other types. It is generally agreed that this factor will limit windmills to contributing only 5-20 per cent of the electricity generated by a system, unless it can be stored. Nor is there enough land to fuel the present world car fleet on liquid fuels produced from plant matter.(6) (If 10 billion people had American levels of car ownership, the fleet would be more than 10 times as big.)
While technical advances are likely to reduce the costs associated with renewables considerably, the magnitude of the reductions required would seem to be quite impossible to attain.(7) It should be stressed that these arguments concern the improbability of meeting present levels of energy demand from renewable sources, yet if the expected 11 billion people are to live as rich people do today then 10 times present world energy production will be required, and if they all have 3 per cent economic growth the energy will have to be found to double output every 23 years thereafter.
Energy conservation and pollution control?
Energy conservation measures are also unlikely to alter this picture significantly. At present considerable savings are being made as attention is given to introducing more energy-efficient technologies. This will probably continue for many years, given that our history of energy extravagance has left much fat to trim. The most common estimates seem to indicate that rich countries might eventually be able to cut their present per capita energy use by half.(8) If 10 billion people were to rise to that total level world energy production would have to be about 5 times as great as it is today - which, as the previous discussion indicates, it is far beyond the capacity of renewables to meet.
The same logic applies to better pollution control. If we cut by 33 per cent the environmental impact caused per dollar of GNP but keep economic output increasing at 3 per cent p.a., then in only 14 years total impact will be as high as it was before the cut, and in another 23 years it will be twice as high.
The most important point here is that if there remains any commitment to growth in economic output, any plausible cuts in energy use will be overwhelmed in time by the increase in energy needed to produce the increasing volumes of output. For example, if we were to have 3 per cent economic growth until 2060, i.e. eight times more production in 2060 than now, the energy use or enviromnental impact per unit of output would have to be one-eighth of what it is now just to keep the total energy use or impact from rising above present levels.
This examination of the scarcity of resources leads to the crucial 'limits to growth' conclusion. It is not possible for all the world's people to rise to the rates of per capita resource and energy use enjoyed by the one fifth of the world's people who live in rich countries today.
This means that we are the overdeveloped countries and the rest are the never-to-be-developed countries. We can only be as affluent as we are because we are hogging most of the dwindling resources. If we are to remain as affluent as we are, the rest must remain much poorer than we are.
While the rich countries take more than three-quarters of the resources produced in the world, most people are deprived of basic necessities. Many of the resources we consume in rich countries are exported from poor countries, including large quantities of food. At least 40,000 people die every day because of deprivation. Our resource expensive way of life is therefore not just impossible to sustain, it is morally indefensible.
Our way of life is ecologically unsustainable
Our resource-affluent way of life also causes many serious environmental problems. We are destroying vital ecological systems. Consider, for example, the greenhouse problem, acid rain, the destruction of forests, the spread of deserts and the loss of plant and animal species. At the present rate, more than a million species will disappear in the next 25 years, because the expansion of human economic activity is destroying habitats. We farm in ways that lose 5 tonnes of topsoil for each person on earth every year (that is 15 times the amount of food we eat), we are destroying the protective ozone layer in the atmosphere, and we are polluting the ground waters and seas.
One of the most unsustainable aspects of our society is the way we continually take large quantities of nutrients from the soil, eat them and then throw them away. We are depleting our soils at a rapid rate. In Chapter 12 it will be argued that we can only have a sustainable agriculture if we change to highly localised economic systems in which most of our food is produced close to where we live and all food wastes can be recycled.
[...the environmental crisis ... is the inevitable consequence of exponential growth in a finite environment. (R.E. Turner, A Short Course in Economics, 1991)]
Most of these ecological problems are direct consequences of the sheer amount of producing and consuming going on. There is, for example, no way of solving the greenhouse problem without drastically reducing the amount of fuel being burnt, and therefore the volume of production taking place. The Intergovernmental Panel on Climate Change has concluded that in order to keep the carbon content of the atmosphere from increasing, let alone reduce it (as we should be doing) we will have to cut carbon input to the atmosphere by 60-80 per cent. If by 2060 we achieve a 60 per cent reduction and share the energy among 11 billion people then world average fossil fuel use would be about one-eighteenth the present Australian average. How can we do anything like this unless we drastically reduce energy use and therefore fossil fuel use?
One of the most disturbing recent observations is the fact that in the last decade a number of crucial biological and ecological indices seem to be approaching or to have passed their peaks. This is true of world cropland area, irrigated area, fertiliser use, and meat, timber, wool and grain production. Some key yields such as rice and wheat seem to be tapering towards upper limits. World fish catch has clearly fallen from levels that will not be attained again. Yet we are only providing well for one billion people, and we might soon have 11 billion on the planet.
Now add to this analysis the implications of continued economic growth. Fig 6.1a represents the present volume of world economic output, distributed across its 5.4 billion people. Figure 6.1b represents output assuming that all the people living in the Third World in 2060 have risen to the living standards the rich countries have now, and incomes in rich countries rise by 3 per cent p.a. until then. World output would be about 19 times as great as it is now. Anyone assuming that all the world's people can be as rich as the rich world's people would be by 2060, given only 3 per cent annual growth until then, must believe that the world's resources and ecosystems can sustain 88 times present annual volumes of output. And 3 per cent growth rate is not sufficient to make our economy healthy! In the 1980s Australia averaged 3.2 per cent annual growth and just about all its economic and social problems became worse. Unemployment at least doubled and the foreign debt multiplied by 10. Prime Minister Keating has emphasised that we need 4.5 per cent growth to start bringing unemployment down. Let us assume we were to average 4 per cent annual growth until 2060, and that by then all the world's people had risen to the 'living standards' we would have then. Total world economic output would be 220 times what it is today.
There is no chance whatsoever of reaching even a 19-fold increase in present output. Yet conventional economists proceed as if we can rise to and beyond these levels; they never acknowledge any need to worry about there being any limits to the growth of production and consumption.
The environmental problem is basically due to overproduction and overconsumption, yet we have an economy in which there must be constant and limitless increase in production and consumption. Again, the problem is due to our economy and cannot be solved until we develop a quite different economy.
'But the market will solve resource scarcities'
Econonmists usually believe that we need not worry about resource scarcity because as supplies dwindle prices win rise, giving the incentive for more to be discovered, or for poorer ores to be processed, or for substitutes to be used. It is true that over some periods of time these mechanisms actually increased the quantities of resources available for use, despite the fact that increasing quantities were being used up.
But this argument fails to recognise that there are limits to these mechanisms which are set by the biophysical nature of the planet. There is a finite amount of oil in the ground, in various forms; of zinc in ore deposits of differing grades; and of farm land of differing quality. Yes: as some of these categories are exhausted it is possible to move on to exploit more difficult categories, but don't conclude that economics is creating resources that were not there before. What is happening is that more of the finite options are being used up. Yes: when conventional oil has gone, price increases might make it attractive to start using shale oil - but that is limited too.
It is probable that technical advances will generate new options in some fields for a long time yet. But overall such options are clearly running out, most seriously in biological and ecological realms. Is it plausible that given the present intense level of scarcity, price rises plus technical advance can sustain 8 or 16 times as much output seventy years from now, and double that level every twenty years thereafter?
The Third World problem
As will be detailed in Chapter 7, an economy based on the pursuit of affluence and growth is the prime cause of poverty, hunger and underdevelopment in the Third World. At first this might seem paradoxical because the conventional view is that growth in the rich countries increases opportunities for the Third World to prosper by exporting things to us, and that growth in the Third World will yield trickle down benefits to all Third World people.
This economy produces extremely unequal distributions of the world's resources. Most resources are being consumed by the few of the world's people who live in rich countries. They make up only 20 per cent of the world's population but they are consuming 75 per cent of the output of resources. Their per capita rate of consumption of energy is around 17 times that of the poorest half of the world's people.
In other words resources are really extremely scarce already; most of the world's people have almost no access to most of them. If world resource output were to be shared more or less equally, each person in the rich countries would receive only about one quarter of the amount we get now. Then we would recognise a problem of scarcity! Similarly, if all the world's people were to use as many resources per capita as we in rich countries do, the total rate of resource use would jump and in a few decades we would have completely exhausted about half the minerals and all the energy.
The second important criticism of the economy in this context is that the growth and trickle down approach to development does little more than enrich the rich. Clearly it is not solving the problems experienced by most Third World people at a tolerable rate, if at all. When 'getting the economy going' and increasing business turnover is the goal of development, the things developed are not those that will serve the urgent needs of most people. The result is development of the industries that meet the demand of the urban rich and the consumers in the rich countries. Hence, what we have had is inappropriate development; development in the interests of the rich. The Third World has developed plantations and mines which are the means whereby most Third World land, capital and labour have become geared to the interests of the transnational corporations and the consumers in the rich countries, with negligible benefit to most Third World people.
In any case - and as has been explained above - it is not possible for the poor countries to rise to rich world living standards. This does not mean that Third World economics should not grow. It means that if getting them to grow is the main goal, the wrong things will be developed. The goal should be to develop the things that are most needed, and then any consequent growth in the economy would be seen as a relatively incidental outcome.
Much literature now argues that the global economy is extremely unjust and that satisfactory development for the Third World will not be possible unless the rich countries stop taking so much of the world's wealth, permit the Third Worid's labour, land and capital to be invested in the production of necessities, and cease supporting greedy and repressive Third World regimes eager to keep their countries to policies that benefit us. This view is aptly summarised by the saying, 'The rich must live more simply so that the poor may simply live.' Both rich and poor nations should change to a development model which provides modest but satisfactory living standards through largely self-sufficient local settlements. The growth and trickle down approach to development is the cause of the most serious Third World problems, not their solution.
In Chapter 4 it was pointed out that our mindless obsession with endlessly raising living standards and GNP is generating many forms of conflict in the world. If all countries insist on striving for higher and higher levels of production and consumption, in a world where resources are becoming scarce and population will double, then the only possible outcome must be more and more fierce struggles for access to dwindling resources and markets.
Quality of life
Chapter 4 also argued that the pursuit of growth does not improve quality of life. Many people would agree that the quality of life in the richest countries is falling now. Most social problems have become more serious in the last 20 years. When increasing production for sale is the supreme goal, governments are most concerned to do what will help firms prosper, and this means resources tend not to be made available for the development of cohesive and supportive communities, or to assist the most disadvantaged groups, or to solve environmental problems that reduce the quality of life. Even more important is the way that emphasis on increasing output and the scope for market forces undermines the non-material values that are crucial for a good society, especially the readiness of people to give, to cooperate and to help each other.
Is there any alternative?
These many and serious global problems are not separate. They are all consequences of the one basic mistake, the commitment to affluence and growth. They are all being generated by the pursuit of material living standards which it is not possible for all to have, and by the determination of even the richest societies to raise their living standards as far and as fast as possible.
Since the mid 1970s a considerable movement for radical change in economic thinking and practice has developed. A number of writers, groups and institutions are now arguing that global problems cannot be solved unless we move to an economy in which we can just produce as little as we need for good material lifestyles, with as little resource use and environmental impact as possible, and without any concern to increase levels of consumption over time. Chapter 12 will argue that it would not be at all difficult to develop such an economy, if sufficient numbers of people wanted to do so.
It is extremely important that the issue of limits to growth is placed centrally on the agenda of public debate, in the media, in schools and in parliaments. The possibility and desirability of growth and affluence are hardly ever doubted, and vast teams of bureaucrats, politicians, business and union leaders, journalists, and teachers as well as economists are continually working hard to promote growth and raise 'living standards'. They fail to see that these goals are now the source of our most serious global problems.
(1) J.E. Tilton and B.J. Skinner, 'The meaning of resources', in B.J. Skinner and D.J. McLaren (eds.), Resources and World Development, New York, Wiley, 1987, p22-
(2) F.E. Trainer, 'How long will resources last?'(In press.) This discussion is based on figures given by B.J. Skinner, 1987, 'Supplies of geochemically scarce metals', in B.J. Skinner and P.C. McClaren, (eds), Resources and World Development, New York, Wiley, p316.
(3) D.C. Hall and J. V. Hall, 'Concepts and measures of natural resource scarcity with a summary of recent trends', in Journal of Environmental and Economic Management, 11, 1984, p363. H. Daly and J. Cobb, For the Common Good, London, Green Print, 1989, p406.