In the wake of the financial crisis, kick-starting growth has been at the forefront of political economics. Governments have leveraged massive amounts of capital to prop up their economies, hoping that expanding markets will help them overcome fiscal and social problems.
But does our faith in a growing economy blind us about its limitations?
The idea of an end to growth is not new. Thomas Malthus predicted it back in the 1790s, as did the Club of Rome during the 1970s. Their basic argument was that growth is inherently coupled to resource consumption, we live on a finite planet, and therefore our economies will have to stop growing at some point.
A few important statistics show our proximity to this limit. According to the UN Food and Agriculture Organization, agriculture accounts for 30 per cent of the Earth’s land surface area, and uses almost all available arable land. Food production uses 70 per cent of all water withdrawn from aquifers, streams, and lakes. Furthermore, global agricultural output will have to increase by 70 per cent over the next 40 years to keep up with our population, all while our heavily cultivated soil suffers up to 75 times the erosion rates of natural areas.
There may be plenty of oil to go around, but our costs for extracting it from unconventional sources is going up, leading to what Jeff Rubin calls peak prices of oil. An often quoted but admittedly shaky statistic is that a $10 increase in the price of a barrel of oil shaves about a half per cent off of Gross Domestic Product over two years. You get the picture.
We probably aren’t on the verge of a doomsday, but it is prudent policy-making to consider how our economies fit within larger natural and physical systems. As the world economy struggles to continue expanding, we should remember that growth is a means to an end, not an end in itself.
Read more: Planning for a world without economic growth | therecord
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