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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.
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.