Creating global prosperity without economic growth

avatar

Preparing for the ‘Peak Everything’ Economy

by Guest Author on 22nd November 2010

Print Friendly

Post Growth is very pleased to bring you a guest post from Dr Mathis Wackernagel, founder and President of the Global Footprint Network and co-creator of the Ecological Footprint. Many thanks to Mathis and GFN for permission to reproduce this article, adapted from a piece originally produced for Friends of Europe, 28 September 2010.

Image of Richard Heinberg's book cover for Peak Everything, a house of cards

Expanding budgets and economies make politics and business easy.

Rather than having to tackle challenging re-distribution conflicts, growth provides more all around, allowing decision-makers to please one constituency without having to take from another one. More is better.

But the problem arises from the physical fact that “more” is produced through generating even bigger costs somewhere else. We are overusing and liquidating the resource base that feeds every value chain. This is putting at risk the ability of economies to operate.

Our estimates reveal that humanity may be using the biosphere’s ecological services 50 percent faster than they renew (www.footprintnetwork.org/overshoot). The consequence is a steady liquidation of Earth’s natural assets. No substitutes for these assets are being created – and there is considerable doubt that substitutes for these assets can be created, particularly at the rate at which they are being depleted.

Physically, this overuse of ecological assets is leading us into a new era, which Richard Heinberg aptly calls “peak everything.”

The effects of declining ecological capacity may be subtle at first. Forests shrink, biodiversity declines, fisheries collapse, CO2 begins to build up in the atmosphere.  It may take a long time for price signals to reflect the reality of declining supply. But since every value chain depends on these assets, for which there is relatively inelastic supply and inelastic demand, this overuse will eventually result in price volatility. Such volatility threatens economic stability.

The “depression- style” economic stabilization policies that we have witnessed since October 2008 are especially unwise in a peak-everything era. Paradoxically, these policies address the devastating consequences of “overconsumption” (fuelled partially by increasing indebtedness through mortgage lending in the US) by stimulating consumption, and try to cure bubbles of excess liquidity (created by rising debt levels in the world) by injecting more liquidity.

These therapies may have worked in times when access to abundant ecological resources was a limiting factor. Today, the limiting factor is not access, but underlying supply.  Accelerating resource use – and ultimate depletion – is making us poorer, not richer.

Consider this: Without the massive government deficit, the US would have had negative economic growth since 2001, according to economist Hannes Kunz of the Institute for Integrated Economic Research (IIER) Switzerland. For 2009, we would have seen negative growth of over 10 percent. We have covered the gap by borrowing against future earnings.

Our current palliative economic therapies have compromised our economies’ potential to deliver in the future. These investments have not helped us access cheap, abundant resources (which no longer exist), but have brought us more deeply into “peak everything.”

Hence the questions are not: do we want growth, nor how much growth is desirable? Rather they become: What will be the consequences of a resource-imposed “end of growth?” How can economies cope with non-linearities such as unexpected contractions? How can we avoid uneven contractions that would lead to social unrest? How can economies be stable, resilient and prosperous in a peak everything world?

One thing is clear: we have to move from an economy that maximizes throughput to one that maximizes our assets, including the wealth of nature.

In the long run, “more” may be better – but the more we are striving for is the underlying natural wealth that makes all our economic pursuits possible.

Image from Richard Heinberg’s book ‘Peak Everything’

{ 1 comment }

avatar Mike November 23, 2010 at 02:33

Hear hear, Mr. Wackernagel! How many more adrenaline shots can this corpse withstand before complete arrest?

{ 1 trackback }

Previous post:

Next post: