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Growth Isn’t Possible: NEF Report

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Andrew Simms, Victoria Johnson, and Peter Chowla are the authors of the New Economics Foundation report "Growth Isn't Possible." This direct challenge to the ever-present mantra of modern capitalism is based on the contradiction between limited global resources and the unquenchable demands of expanding markets.

The previous report, "Growth Isn't Working," demonstrated that far from alleviating global poverty, the benefits of global economic growth were highly unbalanced and that globalisation, far from helping developing economies, was bleeding them of resources. The current report places growth in the context of global warming and climate change.

The science is too clear to be ignored that human activity is producing increasing levels of carbon dioxide and that this is a fundamentally important factor in global warming. That necessarily imposes economic constraints on growth. If growth requires an increase in carbon dioxide emissions, then it will be achieved at the expense of damaging the environment to the extent of undermining economic activity itself. Business as usual means irreversible damage to the environment. So much is already very clear.

The very term "growth" is ambiguous because it is possible to have increased economic activity caused by clearing up after environmental disasters such as floods and earthquakes. You can also have growth when an increasing proportion of the population is deprived of work.

But the key problem concerns the doubling time. Suppose an economy grows by 3%. It will double in capacity in 23 years, but it will consume as much in that time as in all previous doubling periods put together. For that reason, either there has to be a massive expansion of available resources, or the growth model becomes unsustainable.

Current human use of global resources is outstripping the world's capacity to replace it by 44%, so the earth needs just under eighteen months to produce the resources that the world population uses in every year. The global resources are depleting, so unless major new energy sources are found and exploited in ways which do not reduce global capacity for renewal, we are emptying the account.

In addition, there are critical planetary boundaries which we need to understand. Besides climate change, these include stratospheric ozone depletion, ocean acidification, biodiversity loss, and global freshwater use. Passing these boundaries does irreversible damage to the environment we depend on.

It has been argued that growth is the way to deal with global poverty, but it isn't working and can't work. Between 1990 and 2001, for every $100 worth of growth in the world's income, just 60 cents found its way to reducing poverty, and that was down from $2.20 in the previous decade. Just as there is historically a fall in the rate of profit (more capital is needed to produce the same amount of value), so there are diminishing returns in the idea of using growth to fund poverty relief. Globalisation doesn't deliver to the poorer economies.

Emissions of carbon dioxide already exceed the most extreme scenario (A1FI) presented by the IPCC. Although it left out consideration of this scenario from its 2007 report to make it more politically palatable, we are already pumping 1000 tonnes of carbon dioxide into the atmosphere every second and it lasts for at least a century. That's an unsustainable rate, which exceeds even the worst scenarios considered. And even if stabilisation occurs at 400ppm, that still leaves a probability of 10-34% that we'll overshoot the 2 degree increase in global temperature.

If you were asked to board a plane with just a 1% risk that it would crash, you would probably refuse. Yet insisting on global growth with the consequent emissions is taking a much bigger risk.

This report provides a challenge to those who believe that growth is the panacea for global ills, whether climate change or the alleviation of poverty. It forces us to question the assumptions of traditional economics and the mantras of global capitalism.

But the report also contains a detailed analysis of these assumptions and their implications. For example, the actual resource cost of refining hydrocarbons means that in energy terms, the process resembles turning gold into lead rather than the other way round. The economic alternatives are considered in detail including clean energy sources, as well as various methods of adaptation and mitigation such as sequestration.

The report ends with a consideration of the alternatives to continuous growth: the stationary state, the steady state, and dynamic equilibrium. The report references another publication entitled The Great Transition which outlines how an economy can continue to grow socially even when GDP is falling.

Although politically committed and presenting a very useful collection of data and analysis, this report comes over as failing to confront the political realities – governments will defend the accumulative interests of business and for them, growth is not an ideological position, but a capitalist economic imperative. While politicians accept the principles of capitalist accumulation based on market competition, they have no ideological basis for questioning continued growth.

For that reason we see all the world leaders constantly reiterating that growth is the answer to all ills. It is likely that climate conditions will get very much worse before politicians are forced to act differently. Left to their own devices, and complacent in their dogmatic belief that free markets tend to equilibrium, competition results in fairness, and the interests of business are the same as the interests of society, the politicians are impotent. They will follow the interests of capital and unfortunately, capital only recognises short term interests – the spreadsheet has no conscience nor any sense of ethics.

It is worth downloading and reading this report if only for the detailed material and discussion of the scenarios, but there are other, better resources available such as the books by John Houghton.

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About Bob Lloyd

  • Dennis Anthony

    Of course – who doesn’t know this? Perhaps even the politicians but they are silent. Can you not, with all your clout, get a reaction from even one?

  • http://www.leavingthelandofwoo.com Bob Lloyd

    [Can you not, with all your clout, get a reaction from even one?]

    Clout?

  • Dennis Anthony

    ‘Clout’ – access to those… NEF has no access?
    I note in the report there is no mention of population levels.

  • http://www.leavingthelandofwoo.com Bob Lloyd

    Dennis, the NEF is a foundation that produces economics research. The clout requires those with the power to change government policy to listen.

    The point about population crops up quite often and although people like Barrie Pittock and John Houghton cover population as an important factor in their books, the scope of the NEF report was rather narrower. Likewise, they didn’t include issues such as dropping biodiversity, the acidification of the oceans, and so on. I suppose they have to apply some sort of focus or the field just expands.

    That’s not to say that the population argument is unimportant but solving population doesn’t of itself solve the global climate change problem. They interact but can be considered separately.

  • http://ruvysroost.blogspot.com Ruvy

    I won’t argue with you on your foolish premise. I’m not a scientist. I’ll let Ray Kurzweil do my talking for me. Listen to the man. He knows what he is talking about.

  • http://ruvysroost.blogspot.com Ruvy

    By the way, I had found a better lecture than that, one that lasted for 1:19 minutes at the Jerusalem President’s Conference last year. I forgot that I had bookmarked it.

  • Baronius

    I’m not really impressed by the NEF report. They concede, as you do, that growth does correlate with poverty reduction. That’s even without considering the ways that the benefits of growth can alleviate the burden of poverty (agriculture and medicine come to mind).

    But that’s beside the point. The report isn’t about whether growth is good, but whether it’s possible to provide the energy needed for growth. On that score, they’re quick to subscribe to speculative global warming forecasts. They also lose a lot of credibility with me by writing off nuclear power without a satisfactory explanation.

  • http://drdreadful.blogspot.com Dr Dreadful

    Baronius, while I agree with you that nuclear energy would go a long way towards solving a whole host of problems (although sadly, practical nuclear fusion seems as far off as ever), energy is not the only factor.

    Raw materials are not limitless either.

  • http://www.leavingthelandofwoo.com Bob Lloyd

    Ruvy, Ray Kurzweil’s TED lecture also makes the point that there are serious challenges in making use of the exponential growth of knowledge. One camp certainly claims that all the current problems will disappear into insignificance given the exponential growth of knowledge, but if that growth is curtailed by resource restrictions, it doesn’t happen.

    Kurzweil himself has argued that the continued exponential growth of knowledge presupposed no resource constraints…

  • http://www.leavingthelandofwoo.com Bob Lloyd

    Baronius:
    There is a massive difference between speculation and prediction. The climate change models in use are based on physical measurements and dynamics which have been tested in practice. You can examine both the nature of the models and their data, and compare their predicted values with actual values for yourself at the IPCC site.

    Speculation implies that it is a gamble but in reality, the IPCC even states the level of uncertainty in the predictions, and they quantify terms like “very likely”. Far from speculation, the predictions operate at a level of accuracy higher than most economic and foreign policy decisions.

    To say that growth correlates with poverty reduction is simply a tautology in the sense that reducing poverty is seen as an increase in GDP. What is critically important is that the increase in wealth in an already wealthy sector is where the growth is concentrated. For developing economies, the overall level of income per capita has not seen growth as a result of globalisation, and that’s the point.

    You can have technical “growth” whilst the majority of the population are getting substantially poorer.

  • http://ruvysroost.blogspot.com Ruvy

    Take the trouble to listen to the lecture at the Jerusalem President’s Conference last year. It dealt with just the issues you raised in comment #9 – along with considerably more….

  • Baronius

    Bob, the report recognizes that world economic growth results in a decrease in the number of those living below the $1/day or $2/day poverty line. So no, the poor are not growing substantially poorer, they’re growing substantially richer.

  • Jordan Richardson

    Baronius, does that account for the movement of the poverty line? In other words, the way in which we judge poverty surely has to be adjusted when we consider changes to standards of living and to working, living wages around the world.

    So when you say that there’s a decrease in those living below the $1/day “line,” isn’t that just akin to saying that the concept of value has risen the world over?

    In other words, aren’t the poor still poor? Isn’t it erroneous to suggest that they’re “growing substantially richer?”

  • Jordan Richardson

    If not erroneous, at least a little dishonest?

  • http://www.leavingthelandofwoo.com Bob Lloyd

    Baronius:
    There’s a lot of dispute about the measurement of poverty. For example, if the number of people living at or below $1 per day stays the same but the world population grows, we can say the proportion of people living below that poverty line has fallen – despite the absolute numbers remaining the same.

    Another measure was looking at calories per day, but that also suffers from regional differences.

    As I said, the growth seen in the developing economies has been disproportionately benefiting the advanced economies. All around the world, governments of developing economies have discovered that globalisation actually means mortgaging their infrastructure to profit foreign investors.

    In sub-Saharan Africa for example, from 1980 to 2000, extreme poverty rose dramatically as the population increased – around an extra 80 million people found themselves in extreme poverty. Climate change played its part too as the rains increasingly failed.

    In India, the effect of globalisation was to spread out the population so that 46% of the kids are malnourished, despite there being lots of offshore companies from the developed economies employing highly skilled Indian engineers. The average poor family now has 100kg less food per year than it did in 1997, and the level of hunger is higher than it has been in decades.

    So there are lots of measures of poverty but it is clear that globalisation hasn’t been an answer. It simply hasn’t worked the way politicians claimed it would. It is possible to measure economic activity to give the impression that the country is benefitting from growth whilst at the same time see an increasing number of its population driven into poverty. Even $2 per day is still poverty.

  • http://www.leavingthelandofwoo.com Bob Lloyd

    Ruvy, I did look at the video and in fact I’ve seen major parts of it on a number of occasions. It’s fascinating stuff.

    The idea that exponential growth in IT and computing power, or any technology needs some tempering as Kutzweil says himself. There are paradigm shifts in the physical processes underlying technology which although fitting an exponential curve, are not thereby predictable.

    There is an element of teleology in looking at the solution of problems by technology since those technologies arose to solve particular problems. It is easy to think that the technology always managed to solve particular problems when in many cases certain problems were not solved, did not provide technological solutions, did not get resolved. In some cases, society simply adapts to not solving those problems. For a very long time, dealing with radioactive waste fell into that category and arguably there still is no acceptable solution to the problem leaving us polluting the planet for millenia.

    Arguably climate change might fall into that category if we expect technology to solve the problem by the arrival of some new discovery or process. Kurzweil himself says that the specific revolutions in technologies are not predictable and therefore cannot be paired with current problems. So we cannot assume that technology will resolve our current problems – though Kurzweil is optimistic.

    One interesting point he makes is that the exponential growth goes in directions that are chosen by human decisions made now. Politicians have a fundamental role in devoting the resources to developing promising technologies. So although potentially we have lots of resources, solar power for example, it requires political action to motivate it. He also makes the point that he is talking in global generalities. Not everyone benefits from the exponential growth of technology, nor from its use.

  • http://ruvysroost.blogspot.com Ruvy

    Bob,

    Thank you for taking the time to look at the Kurzweil lectures. Truth be told, they do not necessarily fit in with my own outlook on things – but the man makes sense in what he says.

    Frankly, I found it disgusting that he was paired with Shim’on Peres, a man who should be behind bars for multiple murders – or hung for treason. Not hobnobbing at the top of society with life preserving treatments available to him – and not the rest of us.

    But that’s life – and death. Who knows? Things may change in a few years.

    When you talk like Kurzweil does, you have to talk in global generalities. Otherwise history makes a monkey of you. That his ideas of being able to generally predict technological evolution do pan out at all, give reality to the validity of his claims, no matter how optimistic they look right now. And you are right – not everyone benefits from the exponential growth of technology, nor from its use. That’s what makes politics still fun….

  • Baronius

    Bob – Look at the NEF’s report, Growth Isn’t Working. It’s the original source for your $2.20 statistic. I’m using a report from the group that you recommended. It shows that world economic growth results in a decrease in the number of people in poverty. A slow decrease, but a decrease.

    Jordan, there are measures of relative poverty and absolute poverty. The $1/day measure is often used as a standard for absolute poverty. Absolute poverty is much more important than relative poverty; no one ever died from being relatively poor.

    “Substantively” would be a better word than “substantially”. Actual, real, soul-crushing poverty, the kind that results in starvation, is decreasing.

  • http://drdreadful.blogspot.com Dr Dreadful

    Baronius, I think you’re missing the point in your eagerness to defend an economic principle.

    While growth would seem to be having some positive effect on global poverty, it is by any measure a minuscule effect.

    Which suggests to me that perhaps this is not the most efficient solution.

  • http://www.leavingthelandofwoo.com Bob Lloyd

    [Bob – Look at the NEF’s report, Growth Isn’t Working. It’s the original source for your $2.20 statistic. I’m using a report from the group that you recommended. It shows that world economic growth results in a decrease in the number of people in poverty. A slow decrease, but a decrease.]

    The point that’s being made is not that “growth” doesn’t happen, but that growth doesn’t mean any kind of panacea for developing countries suffering widespread poverty. Even if people are earning $2 per day, if food is too expensive, they will still go hungry – that’s what’s been happening in many parts of India. On paper, they are out of the extreme poverty measure and yet their kids are going hungry.

    That’s the irony in the dollar measure of poverty. Look at the official growth rates of India and yet almost half of the country doesn’t get enough to eat and the country ranks 94th out of 119 in the Global Hunger Index. That’s a pretty clear indication that growth isn’t an adequate measure of social progress.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Dreadful (#19),

    You might want to look at the following article by Charles Taylor, “Growth, Legitimacy and the Modern Identity,” a pdf file. (It’s a shorter version of “Legitimation Crisis?” in Taylor’s later Philosophy and The Human Sciences, Philosophical Papers 2, but I think it would do.

    It’s fairly long, but it does tackle the notion of growth and its pluses and minuses – even as regards the once-prosperous society such as ours.

    You might find it interesting.

  • Baronius

    Dread and Bob, of course world economic growth isn’t a panacea. But it’s better than the alternative. It helps people who are in the worst poverty (with food, medicine, etc.), and helps people out of the worst poverty (by providing them with income).

    And growth isn’t a thing like rocks or trees. It means a lot of things. It has repercussions that are beneficial, like the assistance to Haiti that’s coming from richer countries, or the digging of a village well that won’t show up as income but saves lives.

    The dollar measure of poverty is as fixed as possible, controlled for inflation and purchasing power parity. It’s as good a statistic as you’ll find. And Bob, the claim in your second paragraph directly contradicts the title of your article.

  • http://drdreadful.blogspot.com Dr Dreadful

    And Bob, the claim in your second paragraph directly contradicts the title of your article.

    It doesn’t if you read it as reported speech – for example like a newspaper headline: “Economy in Toilet, Senator Says”.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    The link in #21 had gone bad. Perhaps this one will do.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Apparently, there’s a glitch.

    Here’s the original site.

    Just click the View button for the first article listed, and the document will open.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    PS: You will have to download the pdf file.

  • Jordan Richardson

    Baronius, thanks for answering. :)

  • http://www.leavingthelandofwoo.com Bob Lloyd

    [And Bob, the claim in your second paragraph directly contradicts the title of your article.]

    Baronius:
    As I said in the article, I think the report comes across as rather naive politically. It’s useful in presenting a lot of material and stats but I find it rather simplistic in that it seems to assume that politicians are free to make whatever political decisions they want.

    In reality, politicians always defend business and it is the nature of completitive capitalism that business interests always override social interests. That politicians often try to conflate the two is a reflection of their ideological role and that’s an aspect that seems singularly lacking in the report.

    Of course, that wasn’t the focus of the report but I think the message would have been strengthened had they taken note of such details.