The End of Growth: Summary

Details

Written by Ian E. Macindoe

The End of Growth:

Adapting to Our New Economic Reality

Richard Heinberg

[New Society Publishers, 2011]

In this book Richard Heinberg (RH) outlines why we are witnessing, and will continue to witness, the end stages of economic growth in the 21^st century. He also provides some rational projections for how we might survive into the post-growth era, and what that era might look like.

Defining Growth

In his overview Introduction RH defines ‘growth’ as ‘the expansion of the overall size of the economy (with more people being served and more money changing hands) and of the quantities of energy and material goods flowing through it’ (p. 1). Energy, its centrality to economic growth and its imminent scarcity, is crucial to the argument. Unless we recognise and understand the significance of our present global situation—if, in fact, we ‘have reached the end of the era of fossil-fueled economic expansion, then efforts by policy makers to continue pursuing elusive growth really amount to a flight from reality’ (p. 7).

While oil depletion is the ‘clincher’ for the crisis, it is only the first of the fossil fuels to contribute to the end stages of growth. As was illustrated by the Copenhagen conference in 2009 and Rio in 2012, ‘the priorities of the most fuel-dependent nations were clear: carbon emissions should be cut, and fossil fuel dependency reduced, but only if doing so does not threaten economic growth’ (p. 19).

Quite a few pages are devoted to a description and analysis of the global financial crisis from 2008 to its current expressions, including the role of money and investments. Use is made of graphs and side boxes with titles such as ‘How to Create a Financial Crisis’ and ‘Credit: The Economic Magnifier’.

Energy Scarcity

In Chapter 3 (Earth’s Limits: Why Growth Won’t Return) the centrality of energy is emphasised: ‘Energy is not just a commodity; it is the prerequisite for any and all activity. No energy, no economy’ (p. 106). RH cites, in the chapter’s end notes, studies that raise doubts that the predicted level of energy use (about 1000 EJ) by 2050 can be achieved and concludes that ‘future energy consumption will be significantly lower than the present level’ (p. 293). In Vol 61, No.1 (January 2011) of Bioscience James H. Brown et al. conclude: ‘The bottom line is that an enormous increase in energy supply will be required to meet the demands of projected population growth and lift the developing world out of poverty without jeopardizing current standards of living in the most developed countries. And the possibilities for substantially increasing energy supplies are highly uncertain. Moreover, the nonlinear, complex nature of the global economy raises the possibility that energy shortages might trigger massive socioeconomic disruption’ (p. 293).

Indeed, the 2009 study of 18 energy sources (from oil to tidal power) against multiple criteria concluded that ‘there is no credible scenario in which alternative energy sources can entirely make up for fossil fuels as the latter deplete. The overwhelming likelihood is that, by 2100, global society will have less energy available for economic purposes, not more’ (p. 117).

Nor does RH hold out hope that China’s economy might strengthen the global economy. China’s growth based on coal, despite the huge investment in renewable energy, ‘is unsustainable and will cease growing in the foreseeable future, impacting many other nations as it does so’ (p. 193).

How can we prepare for economic chaos?

RH is clear about the contraction of the global economies. He quotes a report prepared by the German military: ‘A shrinking economy over an indeterminate period presents a highly unstable situation which inevitably leads to system collapse … The risk to security posed by such a development cannot even be estimated’ (p. 236). But RH thinks that, if properly managed, the process can lead to a viable transition.

In principle, to navigate through an imminent financial-monetary collapse, governments will need to adopt non-growth emergency strategies that will buy time to plan and implement more permanent steady state economic policies. Of six short-term strategies considered, RH opts for (a) a modified debt jubilee (a form of default), and (b) inflation via creation of non-debt based currency. He describes the details of these strategies, then stresses that they merely ‘buy time’ in order to tackle the decline in energy and minerals, over-population, and worsening environmental problems. ‘Once we have bought some time, we must begin to redesign certain basic structures of the economy that currently function properly only in a context of constant growth’ (p. 241).

Post-Growth Money

Our present debt-based currency can only function well in an expanding economy. We need to create a monetary system that ‘would liberate the exchange process from political and banking interests that presently tend to distort and commandeer it for their own ends: a system that could serve the needs of a steady-state or shrinking economy as easily as those of one that is growing’ (p. 242). RH then considers a few of the alternatives that have been suggested, including that of Herman Daly in his book The Steady State Economy. He also mentions such options as versions of Local Exchange Trading Systems (LETS) and notes that Daly and others agree that ‘governments should support and facilitate the emergence of local currencies’ (p. 244).

Post-Growth Economics

Conventional economics makes certain assumptions that are plainly incorrect (e.g. the environment is a subset of the economy; resources are infinitely substitutable) and need to be replaced with four fundamental principles as the core of economic theory:

• ‘Growth in population and consumption rates cannot be sustained.
• Renewable resources must be consumed at rates below those of natural replenishment.
• Non-renewable resources must be consumed at declining rates (with rates of decline at least equalling rates of depletion), and recycled wherever possible.
• Waste must be minimized, rendered non-toxic to humans and the environment, and made into “food” for natural systems or human production processes.

Further, economics must aim for a dynamic balance between efficiency (maximizing throughput) and resilience (adaptability, redundancy, diversity and interconnectivity)—whereas today economists focus almost entirely on efficiency’ (p. 247).

RH again quotes Herman Daly’s distinction between economic growth and uneconomic growth: ‘uneconomic growth consists of GDP gains that are accompanied by static or declining social benefits, as for example when a certain amount of short-term growth is achieved by undermining ecosystems whose services have a greater long-term value’ (p. 248). This and related ideas are reflected in the work of many authors and organisations, such as those pursuing the ‘degrowth’ movement in Europe and the ‘voluntary simplicity’ movement in the USA. Daly and other steady-staters have suggested that, to move towards a sustainable post-growth world economy, the following ideas should be built into policies:

• ‘A cap-auction-trade (or cap-and-dividend) system for extraction rights for basic natural resources;
• A shift away from taxing income and towards taxing resource depletion and environmental pollutants;
• Limits on income inequality;
• More flexible work days; and
• The adoption of a system of tariffs that would allow countries that implement sustainable policies to remain competitive in the global marketplace with countries that don’t’(pp. 251-2)

Many of these alternative economists propose the partial replacement of corporations with cooperatives that are better motivated to fulfil social needs and that are characterised by:

• ‘Voluntary and open membership,
• Democratic member control,
• Member economic participation,
• Autonomy and independence,
• Education, training and information,
• Cooperation among cooperatives, and
• Concern for community’ (p. 254).

Alternatives to Gross Domestic Product

The shortcomings of GDP are reviewed and alternative systems for measuring social progress are considered. As GDP growth become unachievable (this is the thrust of RH’s book) societies need to reconsider their socio-economic aims and measures. ‘If we aim for what is no longer possible, we will achieve only delusion and frustration. But if we aim for genuinely worthwhile goals that can be attained, then even if we have less energy at our command and fewer material goods available, we might nevertheless still increase our satisfaction in life’ (p. 259).

Life After Growth

While RH is reluctant to make specific predictions (he describes himself as ‘a trend spotter’) he has used his website --- www.TheEndofGrowth.com --- to advise on individual adaptations to the end of growth. However, as a general injunction he says that ‘social cohesion must be our highest priority in a future of mounting economic and environmental challenges’ (p. 269). He then outlines such movements as Transition Towns and Common Security Clubs as local responses to the challenges.

What might a sustainable society look like?

Aware of the ‘bumpy ride’ ahead, and even if the kinds of changes being suggested could be realised in full, RH warns that there are still economic, social and environmental perils to be faced for decades to come. Still, as he implies, there are reasons to outline what could be brought about under a ‘best case scenario’: the economy must be steady state (not requiring constant growth); the harvesting of renewable resources at a rate slower than their replenishment; declining use rates for non-renewable resources, with the reuse and recycling of metals and minerals wherever possible; stabilisation of human populations at sustainable levels, and so on.

In our present situation we are beginning the change from our ‘fossil fuelled, debt-and-growth-based industrial civilization towards a sustainable, renewable, steady-state society…[which] will be characterized by an overall contraction of society until we are living within Earth’s replenishable budget of renewable resources … The remainder of the current century will be a time of continual evolution and adaptation as we head, in fits and starts, towards that distant goal—which will itself be a dynamic rather than a static condition, in that human beings will still be evolving and society will still need to adapt continually to its changing environment’ (p. 284).