Martin Wolf is the chief economist editior of the Financial Times. Earlier this year he surprised us by claiming that The Club of Rome had been wrong - in defense of the growth paradigm.
Now there could be a change of opinion. We are not quite sure yet.
Mr Wolf's historical accounts and conclusions are debatable. More important are his conclusions at the end of the article, which seem incoherent.
On the one hand Wolf writes "Intense distributional conflicts must then re-emerge - indeed, they are already emerging - within and among countries", which demonstrates that resources are becoming increasingly scarce.
On the other hand he says "The condition for success is successful investment in human ingenuity," which seeks refuge in hope and the works of the human spirit.
The late Julian Simon made a sport of calculating how many people this earth could sustain. 80 billion were conceivable, in his mind, if humans would use their "Ultimate Resource", their creativity.
We know that no amount of creativity can revive extinct species and recreate lost resources, burned, consumed and gone forever. We are afraid Mr Wolf believes that ingenuity i.e. technology can feed more people with more goods whilst simultaneously the raw material stocks are declining.
Human intelligence should lead to a revision of long-cherished paradigms of endless progress. We will face the hard material realities of the end of luxury. This is not a matter of political thought or finding energy sources.
It is matter, that is earth, food, water, the necessities of subsistance. Either we reduce our consumption or we will perish.
ecological psychologist and
environmental scientist @ ecoglobe.org 22.12.2007
Also see "Hostility to the notion of limits to growth" (with reeaders' comments)
Your comment or question
By Martin Wolf December 19 2007
We live in a positive-sum world economy and have done so for about two centuries. This, I believe, is why democracy has become a political norm, empires have largely vanished, legal slavery and serfdom have disappeared and measures of well-being have risen almost everywhere. What then do I mean by a positive-sum economy? It is one in which everybody can become better off. It is one in which real incomes per head are able to rise indefinitely.
How long might such a world last, and what might happen if it ends? The debate on the connected issues of climate change and energy security raises these absolutely central questions. As I argued in a previous column ("Welcome to a world of runaway energy demand", November 14, 2007), fossilised sunlight and ideas have been the twin drivers of the world economy. So nothing less is at stake than the world we inhabit, by which I mean its political and economic, as well as physical, nature.
According to Angus Maddison, the economic historian, humanity's average real income per head has risen 10-fold since 1820.* Increases have also occurred almost everywhere, albeit to hugely divergent extents: US incomes per head have risen 23-fold and those of Africa merely four-fold. Moreover, huge improvements have happened, despite a more than six-fold increase in the world's population.
It is an astonishing story with hugely desirable consequences. Clever use of commercial energy has immeasurably increased the range of goods and services available. It has also substantially reduced both our own drudgery and our dependence on that of others. Serfs and slaves need no longer satisfy the appetites of narrow elites. Women need no longer devote their lives to the demands of domesticity. Consistent rises in real incomes per head have transformed our economic lives.
What is less widely understood is that they have also transformed politics. A zero-sum economy leads, inevitably, to repression at home and plunder abroad. In traditional agrarian societies the surpluses extracted from the vast majority of peasants supported the relatively luxurious lifestyles of military, bureaucratic and noble elites. The only way to increase the prosperity of an entire people was to steal from another one. Some peoples made almost a business out of such plunder: the Roman republic was one example; the nomads of the Eurasian steppes, who reached their apogee of success under Genghis Khan and his successors, were another. The European conquerors of the 16th to 18th centuries were, arguably, a third. In a world of stagnant living standards the gains of one group came at the expense of equal, if not still bigger, losses for others. This, then, was a world of savage repression and brutal predation.
The move to the positive-sum economy transformed all this fundamentally, albeit far more slowly than it might have done. It just took time for people to realise how much had changed. Democratic politics became increasingly workable because it was feasible for everybody to become steadily better off. People fight to keep what they have more fiercely than to obtain what they do not have. This is the "endowment effect". So, in the new positive-sum world, elites were willing to tolerate the enfranchisement of the masses. The fact that they no longer depended on forced labour made this shift easier still. Consensual politics, and so democracy, became the political norm.
Equally, a positive-sum global economy ought to end the permanent state of war that characterised the pre-modern world. In such an economy, internal development and external commerce offer better prospects for virtually everybody than does international conflict. While trade always offered the possibility of positive-sum exchange, as Adam Smith argued, the gains were small compared with what is offered today by the combination of peaceful internal development and expanding international trade. Unfortunately, it took almost two centuries after the "industrial revolution" for states to realise that neither war nor empire was a "game" worth playing.
Nuclear weapons and the rise of the developmental state have made war among great powers obsolete. It is no accident then that most of the conflicts on the planet have been civil wars in poor countries that had failed to build the domestic foundations of the positive-sum economy. But China and India have now achieved just that. Perhaps the most important single fact about the world we live in is that the leaderships of these two countries have staked their political legitimacy on domestic economic development and peaceful international commerce.
The age of the plunderer is past. Or is it? The biggest point about debates on climate change and energy supply is that they bring back the question of limits. If, for example, the entire planet emitted CO 2 at the rate the US does today, global emissions would be almost five times greater. The same, roughly speaking, is true of energy use per head. This is why climate change and energy security are such geopolitically significant issues. For if there are limits to emissions, there may also be limits to growth. But if there are indeed limits to growth, the political underpinnings of our world fall apart. Intense distributional conflicts must then re-emerge - indeed, they are already emerging - within and among countries.
Person of the Year 2007 Person des Jahres 2007 Personne de l'année 2007
The response of many, notably environmentalists and people with socialist leanings, is to welcome such conflicts. These, they believe, are the birth-pangs of a just global society. I strongly disagree. It is far more likely to be a step towards a world characterised by catastrophic conflict and brutal repression. This is why I sympathise with the hostile response of classical liberals and libertarians to the very notion of such limits, since they view them as the death-knell of any hopes for domestic freedom and peaceful foreign relations.
The optimists believe that economic growth can and will continue. The pessimists believe either that it will not do so or that it must not if we are to avoid the destruction of the environment. I think we have to try to marry what makes sense in these opposing visions. It is vital for hopes of peace and freedom that we sustain the positive-sum world economy. But it is no less vital to tackle the environmental and resource challenges the economy has thrown up. This is going to be hard. The condition for success is successful investment in human ingenuity. Without it, dark days will come. That has never been truer than it is today.
Person of the Year 2007 Person des Jahres 2007 Personne de l'année 2007
*Contours of the World Economy, 1-2030 AD, Oxford University Press 2007
firstname.lastname@example.org [bold highlighting added by ecoglobe]
"The increase in China's energy demand between 2002 and 2005 was equivalent to Japan's current annual energy use." This nugget of information, buried in the International Energy Agency's latest World Energy Outlook, tells one almost all one needs to know about what is happening to the world's energy economy.
Neoclassical economics analysed economic growth in terms of capital, labour and technical progress. But, I now think, it is more enlightening to view the fundamental drivers as energy and ideas. Institutions and incentives provide the framework within which the development and application of useful knowledge transforms the fossilised sunlight on which we depend into the stream of goods and services we enjoy.
This is the world of abundance that China and India are now joining. Nothing short of a catastrophe will stop them. For the pessimists, however, particularly climate-change pessimists, catastrophe will follow. What is certain is that the challenges ahead are huge.
Here, then, are the highlights of the new report.
First, if governments stick with current policies (which the IEA calls the "reference scenario"), the world's energy needs will be more than 50 per cent higher in 2030 than today, with developing countries accounting for 74 per cent, and China and India alone for 45 per cent, of the growth in demand.
Second, this huge increase in overall demand occurs even though energy intensity of gross world product falls at a rate of 1.8 per cent a year.
Third, fossil fuels are forecast to account for 84 per cent of the increase in global energy consumption between 2005 and 2030.
Fourth, world oil resources are, insists the IEA, sufficient to meet demand at prices close to $60 a barrel (in 2006 dollars). But the share of world supply coming from members of the Organisation of the Petroleum Exporting Countries will rise from 42 per cent to 52 per cent. Moreover, "a supply-side crunch in the period to 2015, involving an abrupt escalation in oil prices cannot be ruled out".
Fifth, coal's share in global commercial energy is forecast to rise from 25 per cent to 28 per cent between 2005 and 2030, because of its role in power generation. China and India already account for 45 per cent of world coal use and drive over four-fifths of the increase under the "reference scenario".
Sixth, some $22,000bn (a little under half of 2006 world gross product) will need to be invested in supply infrastructure, to meet demand over the next quarter century.
Seventh, even with radical measures to reduce the energy intensity of growth under the "alternative policy scenario", global primary energy demand would grow at 1.3 per cent a year, only 0.5 percentage points a year less than in the "reference scenario".
Eighth, China will become the world's largest energy consumer, ahead of the US, shortly after 2010.
Ninth, under the reference scenario, emissions of carbon dioxide will jump by 57 per cent between 2005 and 2030. The US, China, Russia and India alone contribute two-thirds of this increase. China becomes the world's biggest emitter this year and India the third largest by 2015.
Tenth, even under the IEA's more radical "alternative policy scenario" CO2 emissions stabilise only by 2025 and remain almost 30 per cent above 2005 levels.
The rest of the world, then, wishes to enjoy the energy-intensive lifestyles that have, hitherto, been the privilege of less than a sixth of humanity. This desire does, however, have big consequences for the world's economic, strategic and environmental future.
The obvious economic question concerns future prices. Today, the price of oil, deflated by the unit value of exports from the high-income countries, is higher than it has been since the beginning of the 20th century. Barring big technological breakthroughs in energy supply or unexpectedly large finds of oil and gas, energy would seem likely to remain relatively expensive.
Yet, to many, a surprise of the 1980s was how much supply finally came on stream and how low demand growth became after the price shocks of the 1970s. Might such an adjustment happen again and, if so, how quickly? Or should we regard the combination of fast-growing giant emerging economies and the dominance of national energy suppliers as fundamentally different?
The big strategic questions concern energy security and the shift in the balance of power towards unattractive regimes, be they Vladimir Putin's Russia, Hugo Chávez's Venezuela, Mahmoud Ahmadi-Nejad's Iran or the House of Saud's Arabia.
The shift in the balance of power occurs in two ways: first, a growing proportion of the fuels vital for what we now think of as civilised life come from just a few, not necessarily friendly, suppliers; second, these countries are becoming vastly richer. Thus, Opec revenues are forecast to triple (admittedly, in depreciating dollars) between 2002 and this year.
The challenge to security comes partly from the difficulty of replacing oil as a transport fuel. Thus, the concentration of likely supply in the Middle East is, inevitably, a concern. So, too, is Europe's growing reliance on Russian gas.
Concerns over energy security also come from the potential for competition for supplies among the big consumers. The sensible approach is to rely on the market. But that may be hard when prices shoot up. At some point, American politicians may ask why the US expends blood and treasure in order to achieve security in the Middle East for the benefit of China. True imperialism - the attempt to seize energy resources for one's own benefit - would be a ghastly error. But to err is all too human.
Finally, we have global warming. Three points shine out on this. First, despite the blather, nothing effective has been done or yet seems likely to be done. Second, effective policy will require big changes in incentives across the globe, including, not least, in the large emerging economies. Third, dramatic changes in technology will also be required, the most important of which will be towards carbon-capture-and-storage at coal-fired power plants.
What is the bottom line? It is simple: commercial energy is the staff of our contemporary life. As demand for energy rises, nothing is more important than ensuring increased supply and efficient use, while curbing environmental damage. Today's high prices are a start. Fundamental innovation and high prices on greenhouse gas emissions must follow.
We have reproduced these article for scientific reasons only because of the volatility of the internet. Copyright The Financial Times Limited 2007