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A Brief History of Economic Growth
Kerryn Higgs is a longtime Webdiary columnist. This is the second article in a series of three that Kerryn has written for Webdiary (see also Is the economy part of the planet—or the planet part of the economy? and Economics and the Laws of Physics)
Environmental change on earth is as old as the planet itself, about 4 billion years. Our genus, Homo, has altered earthly environments throughout our career, about 4 million years. But there has never been anything like the twentieth century. J. R. McNeill
As noted in my previous piece (Is the economy part of the planet – or the planet part of the economy?), retired Australian Reserve Bank Governor Ian MacFarlane dated economic growth from the time of the Industrial Revolution, suggesting it was negligible before that time. Yet initial responses by prominent economists to the controversial First Report to the Club of Rome, The Limits to Growth, expressed a different idea about the history of economic growth.
Robert Solow, who won the 1987 Nobel Prize in Economics, took the ‘continuous progress’ view of economic change, commenting that “[t]he world has been exhausting its exhaustible resources since the first cave man chipped a flint”. Wilfred Beckerman, Professor of Political Economy at University College London before moving to Oxford, was also explicit about continuity. According to Beckerman, the problems associated with exponential growth in the use of any finite resource have “been true since the beginning of time; it was just as true in Ancient Greece… This did not prevent economic growth from taking place since the age of Pericles… [T]here is no reason to suppose that economic growth cannot continue for another 2500 years.”
This ‘continuous progress’ view appears to be primarily a rhetorical device, designed to subsume economic history in recent centuries under the conditions of transtemporal humanity, allowing us to liken any part of the past few hundred thousand years to the situation we face today and, thus, to characterise the state of our present system as the permanent and normal condition of a healthy economy.
Economic history of the long term, however, contradicts the idea of consistent resource exploitation and economic growth. Clive Ponting’s Green History of the World, as well as embedding human history in the broadest geophysical processes, points out that “[f]or all but the last few thousand years… humans have obtained their subsistence by a combination of gathering foodstuffs and hunting animals”—a way of life involving virtually no resource extraction, and no changes we would describe as economic growth. Ponting identifies two great transitions in human history: the first to farming starting about 10,000 years ago and the second to the dominance of fossil fuels and the development of an industrial economy in the last few hundred years.
The first agricultural revolution took place over millennia as humans began to grow crops and improve pastures, initiating enormous ecological damage at the local level, mainly as a result of the progressive clearing of the forests. Nevertheless, though the world’s overall economic growth quickened somewhat, it remained barely perceptible over the subsequent ten thousand years or so. Before 1500, both economic and population growth were extremely slow, with improvements in technique only occasional and population taking a thousand years or more to double.
In the 1994 Worldwatch Report on the State of the World, Alan Durning used the metaphor of a ten minute satellite-view film of the deforestation of earth over the last 10,000 years to demonstrate the immense change of pace and scale involved in the second of Ponting’s transitions. The initial agricultural revolution of the earliest of these millenia is invisible. The first obvious sign of change is in the eighth minute, with the disappearance of forest around Athens and on the Aegean islands. Reductions in Europe, China, India and Central America can be seen from the beginning of the last millennium (1000 AD), but the forests do not shrink appreciably until the years from 1800 to 1950, co-incident with the Industrial Revolution and frontier expansion in the US, when about 6% disappears. From 1950, in just 3 seconds of Durning’s film, a further 60% of the original forest vanishes, and although trees still grow on some three quarters of the original forest area, [26% of the earth], less than half of these represent intact ecosystems, the rest "biologically impoverished stands of commercial timber and fragmented regrowth”.
In short, ecological effects of human economies, local in scale for millennia, became global very recently—and very rapidly. We are obviously not carrying on the same kinds of economy as Paleolithic people or the ancient Greeks. We have not been here before.
This escalation of economic scale and intensity would not have been possible before the exploitation of fossil fuels. By 1700, with the help of domesticated animals, windmills and water wheels, the most efficient agricultural societies could command four or five times more energy per head than their hunting and gathering predecessors; even so, the vast majority remained poor and restricted to a life of ‘grinding toil’. A century later, the coal-powered steam engine began to transform economic processes. According to historian J. R. McNeill, he nineteenth century saw energy availability multiplied by five, about the same increment as in the 10,000 years before 1700. But that was a mere prelude to the ‘real boom’ to come—when liquid petroleum fuelled a further twelve-fold expansion of energy use in the twentieth century, ushering the ‘bizarre, anomalous and thoroughly unsustainable’ times through which we are living.
Oil is a miracle fuel. It is compact, liquid, transportable and cheap to produce; once tapped, large amounts can often be extracted under the oilfield’s own pressure. Even today, though much of the ‘easy oil’ has already gushed out, the cost of extraction in many large middle-eastern oilfields remains insignificant.
The development of petroleum revolutionised transportation, making the individual private automobile, aviation and mechanised agriculture viable. By 1950, oil had replaced coal in the US as the principal fuel of industry as well as transport and heating. In the following 20 years, similar transitions occurred in the rest of the industrial world. Simultaneously, multiple uses for the range of hydrocarbons found in oil were also developed, until petroleum has become embedded in every aspect of everyday life—from fuel to fertiliser and pesticide, from pharmaceuticals and cosmetics to plastics and fabrics, and in an array of industrial chemicals and processes.
In contrast (and apart from minor coal-burning), all energy used before the Industrial Revolution was more or less directly solar—from wind, water, animals fed on plants photosynthesising daily solar flows, or human muscle fed the same way. Even wood, as a fuel, concentrates the solar energy trapped by trees over decades—or centuries at most. Coal and oil, on the other hand, are fossilised solar energy, compacted and distilled out of tens of millions of years of sunlight stored by the primitive trees of the vast Carboniferous swamps (coal) or zooplankton and algae thriving in the shallow seas of the Mesozoic (oil). Just how much solar energy is stored in these fuels is reflected in Jean-Michel Severino’s estimate that 200 tons of plant matter are concentrated in every litre of oil. This is immensely concentrated energy, capable of performing colossal amounts of work. It is one of the most basic preconditions for the bizarre exuberance of the era of economic growth through which we are travelling, often under the impression that it’s the normal and natural state of human affairs.
References:
Beckerman, Wilfred (1972), “Economists, Scientists, and Environmental Catastrophe.” Oxford Economic Papers, 24 (3): 327-344.
Solow, Robert M. (1974), “The Economics of Resources or the Resources of Economics”, American Economic Review, 64 (2), 1-14.
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The First Liberal Project
Karl Polanyi's Great Transformation was a brilliant critique of 19th-20th century liberalism.
Including stuff like the absurdity of thinking that land and labour could be turned in money.
He also pointed out that Fascism did not only occur in the countries that lost WW1, but in those countries where liberal economics was adopted.
It's a great read.
The politics of unsustainability
Jean-Michel Severino, as cited in Kerryn Higgs' lead article, said: "Millions of years and 200 tons of plant matter are necessary to produce one liter of oil, whereas just 15 kilograms of plant matter are required to make one liter of synthetic fuel." It might have taken that much buried plant matter to make a litre of the crude oil that comes out of a well, but the last paragraph of the lead article could give the impression that the total of 'stored sunlight' in the 200 tonnes of plant matter has somehow made its way into the litre of oil. There are certain fundamental natural laws that would contradict this.
Making fuels such as methyl alcohol (methanol) from wood chips, sawdust and other waste sources of cellulose has long been known. Use of such to make oil is described at http://journeytoforever.org/biofuel_library/wood_to_oil.html. To date the oil industry has presumably found it to be cheaper and easier to extract fossil petroleum and refine it to fuel than to go down the renewable path. Economics would suggest that, environmental considerations aside, enterprises basing themselves on the cheapest fuel would have a competitive advantage over those which did not.
The trouble is that these days environmental considerations are not so easy to set aside. Climate change deniers like John Howard are being forced to the conclusion that cooperative and international action is necessary if the greenhouse problem is to be overcome. Watch APEC for an indication as to how capable the present leaders and their political machines are in delivery on this.
Thanks to popular direct access to satellite imagery and related information, such as via Google Earth, a feedback process would appear to be building on the effect of human consumption of resources on the systems that sustain life on the planet. The politics of unsustainablity is becoming increasingly cramped. If a turnaround is to be achieved, and the greenhouse gas content of the atmosphere put into decline, it will be because of millions of conscious acts by humans in their economic activity, and increasing numbers of acts of censure on politicians and others who refuse to cooperate.
As a Canadian...
John, notice that most Canadians also don't make a lot of noise about their oil reserves. They aren't totally silly.
The Canadian oil thing has been going on for a long time with the US - the Houston/Calgary flight schedule has been driven by it for as long as I can remember.
Be of good oil! Oil-lay!
Russell
Nothing like "in the long run"
Excellent article Kerryn. Thanks. A lot of people missed what Club of Rome was about. Sad because we have now collectively wasted nearly 40 years of opportunity...not much in the great timeline of the planet but a lot in terms of the increasing speed of greed/change.
We continue to miss opportunities collectively with blinkered leaders and growth fanatics of all sorts, including the present government. Lack of leadership on these issues is rampant. For a planet that is clearly "finite", clearly under stress, and presumably is what we all rely on for sustanence we treat it very badly. One would have hoped that by now a plant like the Gunn's mill wouldn't stand a chance but no we've got "leaders" in Tasmania going hell bent for leather to put the plant in place "for the economy" [their back pocket more likely] at the cost of the established economy and the environment more generally. Grossly irresponsible.
It is all about, as CoR said, how systems behave "in the long run" - and in the long run the large systems of the biosphere don't give a toss about humanity so it would be nice if humans gave a bit more thought to the preservation of humanity (i.e., themselves)!
APEC will be another wasted opportunity...(or is that "aspirational opportunity" [gag]?) ... just more of the same from do nothing (non) leaders.
And it isn't so much about capitalism, sorry folks, it is about greed - whether it be under a capitalist system or some other system of "government". Most of this type of discussion is mis-framed so of course never goes anywhere in real solutions or political terms.
The issues need a new paradigm for discussion and so far as I know we haven't got that yet - all the major discussions are trying to do this inside the current economic (growth) philosophies - not much chance at sustainability in them.
Russell
Where does the US get it oil?
Nearly everyone thought it was Saudi Arabia. I know the Saudis are the most logical choice.
But as you can see below, they're not the right one:
Source: Energy and Capital
The Canadian oil comes from oil sands which uses natural gas to produce oil.( More CO2 emissions)
Natural gas prices will keep rising. Guess where the US gets practically all of its natural gas imports. So how can we be so sure the price is going to rise?
There are two major reasons.
The first is that Canadian natural gas production peaked years ago. So the amount of gas available to export to the U.S. will continue to decline.
Secondly, the increase in oil sands production means they're going to use a lot more natural gas to extract the oil. Remember, it takes roughly 1,200 cubic feet of gas to produce one barrel of oil.
Why is the US messing with oil sands? "If it takes so much natural gas to extract the oil, why are they bothering with it in the first place?"
Although the process uses 1,200 cubic feet of gas, that one barrel of oil yields the same amount of energy as 6,000 cubic feet of gas.
Tame the beast - anyone?
Mmmmm, looks like there are some of us who feel capitalism is headed for the oncology ward.
Which leads to the question: how do we go about removing the cancer without killing the patient?
And what part of capitalism is cancerous and what part is essential for successful social and commercial interaction?
Karl Marx had his thoughts about the subject, unfortunately some took him seriously, the rest is history and ironically the last remaining communist power appears to be taking to capitalism like the natural born players they have always been.
Methinks capitalism has a long way to go yet, and I would agree the patient needs surgery, but let's not OD the patient yet, it may be the best we can do; taking into account the true nature of the beast and all us little beasties.
So, does anyone have ideas on how to tame the beast?
Tame the Beast
There are lots of ways.
Setting up sustainable industries.
Co-op's.
Sociocracy.
Co-housing.
The list is extensive and impressive.
Endless growth in the aviation sector is myopic.
Another example, of our addiction to continual growth, political and religious leaders have not come to grips with the realities of the necessary cut backs, we will have to make to reach our GHG targets. What is the Vatican doing to reduce it GHG emissions? Starting up its own airline.
One in ten Australians are living in poverty
The economy may be in growth, but nearly 2 million Australians live in poverty. To me this indicates, the failure of the so called "trickle down effect". Australia, now has a large underclass, who are not sharing in economic growth. We have had several years of a boom economy some including Mr. Howard say this is as good as it gets. Well let me say, it is not good enough. Our hospitals, our aged care facilities are underfunded and the poor are the ones that are suffering the most.
Capitalism is cancer
Justin, I believe capitalism will end up where all failed despotic ideologies end up, in the past. The only growth we need is sustainable technological and environmental growth, economic growth doesn't bring any benefits. Only the brain dead blind and delusional would fail to see this, considering the situation economics has brought our planet to. We now have lib/lab faction leaders, who are economic, conservative, religious, brainless clones, so our future is determined towards chaos and collapse.
Recessions, are methods for the rich to increase their wealth at others expense. They raise interest rates, using the lie it will restrain growth, sending the ordinary people to the wall. Then the corporate rich give themselves the assets of the people, getting more return, cutting employment and closing or taking over competition. When they have bled the populace dry, they lower interest rates and encourage people to spend more until they again reach the limit of their ability, from there the cycle starts again. One of their most despotic ploys, is building infrastructure using the peoples money, then selling it to themselves or their friends and offering to sell the people shares, in what they already own, at inflated prices. From there, they collapse the share price and buy the stock cheaply, so they get the infrastructure, peoples shares and all future profits. Next step is to demand and get, monetary and tax subsidies so they can make more profits without responsibility or accountability. This means the people rarely benefit from their labours or investments, except in a token way, as prices are constantly forced up by the political and corporate elite, keeping people trapped in debt and enslaved to the economic corporate world.
It amazes me, how people don't seem to have evolved intellectually enough, to see how economic ideology only benefits those in control. Just like all past and current ideologies, they promise much but give only enslavement, destruction and ongoing chaos to those gullible enough to be sucked in to current ideological delusion.
They Are Parasites, Alga!
Congratulations on this comment, Alga! The con that is capitalism is given a well-deserved punch on the nose.
People who earn six figure incomes and more won't like it of course but they're the ones who benefit from this grossly unfair and divisive economic system. That's why they love Howard because he has further enhanced their money-making potential while the struggling pawns in the capitalist game pay the price.
Cancer is an apt word to describe capitalism indeed!'Parasites adequately describes its disciples!
Just wondering
Economic growth is the essential part of capitalism as we know it. Negative growth of course is the dreaded recession. Growth as we all know can bring forth and support many wounderful things; we also refer to growth as a cancer.
I wonder where capitalism (as we know it) will end up; in the garden of life or the oncology ward?
Biofuels raise food prices pt2
Meanwhile, in the burgeoning oil-substitutes market:
Peak Oil Now
Ghawar, the world's largest oil field, situated in Suadi Arabia, produces about 5 million barrels of oil a day, about 6.25 percent of the worlds supply. This field, is one, of only four oil fields in the world that can produce over 1 million barrels per day. Ghawar's rate of production is in decline. Three of the four other million plus, oil fields are also in decline.
Saudi Aramco estimates, that it's production, from all its fields in 2011 will be about 10.15 million barrels about the same as today's capacity. The US department of energy estimates the Saudi production will have to be 13.6 million barrels by 2010 and 19.5 million barrels by 2020 to meet the world's demand for oil.
Saudi Arabia currently produces about 8 million barrels a day roughly one tenth of the worlds needs. If Saudi production falls short the consequences will be significant. Matthew Simmons believes Saudi's oil production will collapse by about 30 percent in the next 3 to 5 years. This would push oil to well over $100 per barrel. The US economy is dependant on cheap plentiful oil. The increase in the cost of oil, could see the collapse of the US economy.
The wonders of economic growth.
Isn't economic growth wonderful? Its' been able to undo in less than two centuries what the planet has taken millions of years to create.
It just shows how eminently economists (academics), have their finger on the pulse of life and the future. Economics has to be the ultimate in despotic ideologies created by the delusions of the unevolved primitive humans, still residing on this planet.
First we had superstitious fear of nature, then worship of mythical gods and demons. Followed by the mythical and destructive warmongering monotheistic god called yahweh, in it's various guises. Now we have the ultimate suppressor and destructor, economic growth at any cost.
This suicide ideology, along with all the other primitive monotheistic minds of the world, is being pushed fervently by programmed academic clones, spruiking the mythical benefits of economic growth, via ecological destruction.
a thought.
Should I email this to Gay and Lennon?
Howard or Rudd? Business Council of Oz or the forestry division of the union? This is the history that is denied and suppressed the most by people who could, should and actually do know better. You know, four million years out of the trees must be a much shorter period than we once thought, given the pathologies we see in play in our time.