The United Nations warned recently that the global consumption of natural resources could almost triple to 140 billion tons a year by 2050 unless nations take drastic steps to decouple economic growth from an ever-expanding use of natural resources. The United Nations also recently projected that the world’s population would exceed 9 billion by 2050. Neither of these projections makes sense and neither will happen. (Click here for the UN Piece)
The world’s population reached 2 billion in 1927; it is expected to reach 7 billion later in 2011. Much of what neoclassical economists consider “normal,” mainly sustained economic and demographic growth, has actually occurred during a period unprecedented in economic and demographic history. Both their models and underlying assumptions evolved during an era that cannot be duplicated, leaving us with numerous and serious questions about how good their models will be in a very different demographic future, especially if that future is constrained by flat or declining crude oil production, rising energy costs, and spiking food costs. The era of cheap fossil fuels has ended, but the kind of thinking that accompanied it has not, which bodes poorly for our ability to deal with the future.
It is easy to see why economists suffer from “physics envy.” After all, that proverbial apple that fell on Isaac Newton’s head in the 17th century, supposedly prompting his discovery of the law of gravity, would have fallen at the same rate then that it would today. The acceleration of gravity has not changed. On the other hand economics as a field of study didn’t even exist then; if it had it would have created “laws” that would probably be of little or no value today because economic laws exist within a much broader world of social and cultural conditions, which are always subject to change.
Consider the notion of tripling our use of natural resources over the next forty years, starting with one example: crude oil. According to the EIA, total oil production in January, 2011, averaged 88.2 million barrels per day (mbd). There are still “experts” who believe that total oil production can be pushed to perhaps 100 mbd, but I know of no one who believes it could approximate three times that, or 244.6 mbd.
The figure below (from Gail Tverberg) shows how total oil production has increased during the last decade. Even if this rate of increase could be maintained over the next 40 years, which is virtually impossible, total oil production would still fall far short of 245 mbd. Both the United Nations and most economists are living in another era, the nineteenth century, when cheap fossil fuels were being discovered and extracted as if there would be no tomorrow.
Figure 1. World "Liquids" Production through January 2011, Based on Energy Information Administration
But tomorrow has arrived! That is critical because if oil cannot be expanded by nearly that much (a tripling), neither can the use of most other natural resources because they are so dependent on the use of oil for their extraction and usage.
Even Nobel laureate economist and New York Times op-ed columnist Paul Krugman wrote last year (Dec. 26, 2010), “What the commodities markets are telling us that we’re living in a finite world, in which the rapid growth of emerging economies is placing pressure on limited supplies of raw materials, pushing up their prices.” Unfortunately, after admitting that Earth was finite, he left that reality behind and in the end embraced the nineteenth century illusion that economic growth can go on forever. As he put it, “This won’t bring an end to economic growth….It will require that we gradually change the way we live, adapting our economy and our lifestyles to the reality of more expensive resources.”
That may be OK for the well off everywhere, at least for a while, but more expensive resources for the poor will translate into more expensive food and an even more marginal existence. Those living in growing shanty towns throughout the poor world know little about economics, but they are living proof that the promises of neoclassical economics have been hollow, and that the distribution of benefits has been extremely skewed. They do not know, either, that their continued reproduction is seen by economists as little more than a steady supply of cheap labor that will be easily exploited in order to supply the rich world with all of the stuff that people want at low prices.
What kind of thinking has so little concern for the welfare of the many even as the few live like royalty? What has happened to justice for all? Why has economic growth over the last century or so resulted not in a better world for all but in a much more populous world of mostly poor people? Economists point at China’s success in raising the living standards of perhaps 300 million people—a rising middle class. They seldom point to the remaining billion or so in China who are still poor and sometimes desperate. With only 5 percent of the world’s people, Americans consume about 25 percent of the world’s energy and other resources, yet most Americans see that as fair and want even more.
The figure below (from the United Nations FAO) shows what has been happening in recent years to world food prices. While Americans and others in rich countries complain about high food and gas prices, people in Third World cities will become more desperate and death rates, especially for infants, may well increase, leading to what I have referred to previously as a “third demographic transition.” It is only a matter of time before death rates in poor countries start to rise.
Figure 2. FAO Food Price Index, June 7, 2011
It is inhumane for the United Nations, most economists, politicians, corporate leaders, and others to pretend that economic and demographic growth are sustainable. They are not, period. Given how nearly 7 billion people are living today, it seems irresponsible to project a population of more than two billion more forty years from now.
Because it has become the overwhelmingly dominant view today, one accepted by the UN, IMF, the World Bank and others, we should look more closely at neoclassical economics. As an example of this view, consider Tim Harford, who wrote in his book The Logic of Life, “[O]ur rational behavior can also produce wonders. The more of us there are in the world, living our logical lives, the better our chances of seeing out the next million years.” Don’t worry about how few other species there might be by then, or what a million years really is, just consider how many humans there might be. If you need an additional image, consider all the cows, pigs, sheep, goats, and chickens that will be needed in order to provide all those humans with enough food to keep them healthy, wealthy, and wise. Harford provides no hint of how many more of us he’d like to see, so let’s consider a couple of examples.
In round figures the world is growing at 1.2 percent annually. If growth continued at that rate, the population would double in about 58 years. But that growth rate is gradually slowing, so to provide our first example of future growth let’s start by slowing the rate of growth to one with a doubling time of 100 years (about .7 percent annually). If we round the current world population off to 7 billion, then we can make some simple calculations. By 2111 there would be 14 billion humans; by 3011, only a thousand years from now, the population would be 7.168 trillion. That is about as far into the future as the Vikings are into the past, so don’t even think about a million years from now.
What if we assume a much slower growth rate, so that human numbers double only every 1,000 years? Then it would take ten thousand years for our numbers to reach 7.168 trillion, still far short of the next million years. That would be about as far into the future as the agricultural revolution is into the past. Keep in mind that Homo sapiens have been around for about 200,000 years and we are struggling to provide 7 billion of us with sufficient food, clothing, and shelter to lead decent lives. There cannot be an economist on the planet who thinks Earth could support 7.168 trillion people. Human population growth cannot go on forever, no matter how optimistic economists might be.
In the meantime we know what has been happening to other species as our own numbers have become rapidly more numerous. The figure below (Source) leaves nothing to your imagination, but these species seem to be written off as little more than collateral damage in the quest for the holy grail—endless growth.
Figure 3. Species Extinction Since 1800
As Gail Tverberg noted recently:
We are consuming a huge amount of fossil fuels, and to maintain anything close to our current economic state, we would need to continue to consume a very large amount of fossil fuels. If a person stops and thinks about it, no level of fossil fuel is sustainable, because we only have a finite amount of fossil fuels. At best, we would be talking about stair-stepping extraction—reducing it to a lower level than today, and holding there for a while.
Even using fossil fuels at current high rates has not been enough to move more than a fraction of the world’s population to a standard of living that most would consider “well off,” let alone extravagant. Billions struggle to survive on a dollar or two a day; hundreds of millions are malnourished.
Widespread evidence of the failure of the modern neoclassical economic model, with its underlying assumption of sustained economic growth, so far has not loosened its grip on the world’s leaders, in part because most of them have not experienced the downside of that model. Most also ignore, or even fail to admit the existence of, externalities that have piled enormous costs on Earth’s environment and on the backs of its people and other residents.
Robert Jensen wrote recently, and perhaps presciently:
More difficult is facing the possibility that the human species has been cast as a tragic hero. Tragic heroes aren’t characters who have just run into a bit of bad luck but are protagonists brought down by an error in judgment that results from inherent flaws in their character. The arrogance with which we modern humans have treated the living world—the hubris of the high-energy/high technology era—may well turn out to be that tragic flaw. Surrounded by the big majestic buildings and tiny sophisticated electronic gadgets created through human cleverness, it’s easy for us to believe we are smart enough to run a complex world. But cleverness is not wisdom, and the ability to create does not guarantee the ability to control the destruction we have unleashed.
We can still pull back from the abyss, but only if we recognize that we are approaching it. In order to succeed we must confront some basic facts, however inconvenient or unpleasant they might seem. As a geographer, I like to think that we can help by combating ignorance about the natural world in which we live and replacing it with firsthand knowledge about interactions between people and places.
First, we need to make it clear that physical growth of any one or any thing is unsustainable on our planet, so we can either change our ways, which would probably mean on a worldwide scale moving from competition to cooperation, or we can let nature decide for us. Nature is impartial; it will not care whether we win or lose. The sooner this lesson is learned, the better. Geopolitics will complicate the issue of cooperation considerably, but it would help if thinking at the United Nations and elsewhere would switch from believing in infinite growth to telling people that the world really is finite, that our numbers are already far beyond what can be sustained at any reasonable standard of living for all, and that our current economic models are inappropriate for the 21st century. Ecological and biological economists need to be elevated to a more respectable position in the field of economics as it is remolded to fit the world in which we now live—we’ve entered an era of rising fossil fuels costs. According to Richard Heinberg:
The stark reality we face is that humanity has embarked on the era of extreme energy, where there are no simple solutions. The inexpensive, high-yield fossil fuels that powered the industrial revolution and that helped make the U.S. the world’s wealthiest and most powerful nation are dwindling, and all of them emit dangerous levels of greenhouse gases. While enormous amounts of natural gas, oil, and coal remain, the portions of those fuels that were cheapest and easiest to produce are now mostly gone, and producing remaining reserves will entail spiraling investment costs and environmental risks. Moreover, while alternative energy sources exist—including nuclear, wind, and solar—these come with their own problems and trade-offs, and none is capable of replicating the economic benefits that fossil fuels delivered in decades past. There is no likely scenario in which the decades ahead will see energy as abundant or as cheap as it was in decades past.
Second, we need to develop methods to weigh such environmental damage as forcing species into extinction or warming Earth’s climate with the benefits of expanding human numbers and gross national products. Neoclassical economics is amoral, but the times call for a much more careful consideration of morality. We cannot continue on our current trajectory without hitting a ceiling, perhaps soon. Whether that ceiling is a lack of sufficient cheap energy, water scarcity, collapse of an important ecosystem, war, or something else, prudence dictates that we act now. William Catton may have been right when he wrote, at the end of his book Bottleneck, “Too late, we have begun to see the runway’s end. I have pity for all who insist ‘there’s still time.’ I deplore those who naively count on merely ‘stopping the clock’ by some yet-to-be-made miraculous breakthrough.”
Third, we must recognize the potential negative consequences of freeing all that carbon stored in fossil fuels for tens of millions of years and sending it back into the atmosphere. Over the last 160 years or so the carbon dioxide content of the atmosphere has risen from about 280 parts per million to 390 parts per million and it continues to tick upward steadily. Since carbon dioxide is a greenhouse gas, our atmosphere is getting warmer. As a result, it contains more moisture than it used to and that moisture is showing up in the form of more dramatic storms and more severe flooding. Wet areas in all likelihood will become wetter; dry ones drier.
Fourth, we must focus more attention than ever on ourselves. It is possible that the low total fertility rates in Europe and elsewhere will spread more quickly than we think to the poor countries, especially in this era of modern communications. We should do everything possible to aid that process, from providing effective contraceptives to anyone who desires them to facilitating the education and empowerment of females around the world. That trend needs to be encouraged; in reality, it may be a necessity. Worse yet, it will probably be forced on us sooner rather than later.
As Ian Morris wrote recently, in his book Why the West Rules—For Now, “The great difference between the challenges we face today and those that defeated Song China when it pressed against the hard ceiling a thousand years ago and the Roman Empire another thousand years before that is that we now know so much more about the issues involved. Unlike the Romans and the Song, our age may yet get the thought that it needs.” We can hope that he is right, but it will not come from economists and others who insist on holding on to 19th century models to explain the world economy in the 21st century.
No matter what humans do to the Earth, it will survive. But to our only planet—with all its wonder, beauty, and mystery—we are nothing, so if we fail to get the thought that we need and instead meet the same fate as the Dodo, we will not be missed. One clear lesson from the geological record is that all species sooner or later go extinct; we should not rush the inevitable.
By Dr. Gary Peters
Published with permission of Gail Tverberg. Gail is a writer and speaker about energy issues. She is especially known for her work with financial issues associated with peak oil. Prior to getting involved with energy issues, Ms. Tverberg worked as an actuarial consultant. This work involved performing insurance-related analyses and forecasts. Her personal blog is ourfiniteworld.com. She is also an editor of The Oil Drum.