What is capitalism's answer to constant economic growth hitting the limit of the planet's finite resources?

  • We keep hearing a lot about economic growth in the media and this answer shows us why it is so important:

    Therefore, we have three options:

    • A constant increase in unemployment. (Generally feared and loathed.)
    • Less time at work per person. (Sometimes impractical. Wastes educational resources as people would still have to study and train just as much only to produce less. Might reduce people's earnings, etc.)
    • Constant economic growth to create new jobs and counteract the reduced need for manpower caused by technological advancement.

    The third option is generally preferred by policymakers, academics, the public, etc. for the reasons described above, as well as other reasons.

    However, perpetual constant economic growth within a planet having finite resources is not possible (it is not sustainable):

    Capitalism requires a constantly expanding production and consumption of goods, which can only be achieved through the increased exploitation of the planet’s natural resources at an unsustainable rate. Because of this reality, sustainable development cannot be achieved without a dramatic reduction in the levels of production and consumption, which directly contradicts the growth logic that drives capitalism.

    So, I am wondering if and how capitalism can deal with this? What if we reach the limits of the environment and economic growth is no longer possible?

    Comments are not for extended discussion; this conversation has been moved to chat.

    Further comments deleted. If you want to discuss how much more economic growth is possible or not please use the chatroom provided by yannis.

    Are you talking about economic growth (more wealth per person) or population growth (more people in total)? There's no real limit to the first, while the second is obviously limited (though depending on how advanced future technology you're thinking about, we might be ~1-12 orders of magnitude away from that limit). Consider the difference between having 10 times more cars to having a new car ten times as often. The first case needs more raw resources, the second doesn't (ignoring waste) - but they both correspond to the same economic growth.

    There are two questions here. One is about finite resource consumption; the other is about the obsolescence (or not) of human labour. They are not directly related. What are you asking about?

    `What is capitalism's answer to constant economic growth hitting the limit of the planet's finite resources?` SpaceX.

    @henning - I am asking about "finite resource consumption".

    @ValarDohaeris Don't forget to mention my friend's Blue Origin. Great company, led by an incredible man.

    Interplanetary expansion. That'd be the answer (actually, that is the answer), not just of Capitalism but any economic model assuming technological progression takes place.

    Space resources!

    Actually, capitalism does not mandate perpetual growth. Indeed, capitalism, functions better under a steady-state economy (including a largely stable population) where there is an equitable distribution of wealth and opportunity. The issue you are probably more wanting to discuss is the idea of earned vs unearned income or more broadly real economics vs fake economics - in this, the ideology of perpetual growth resides and all of it's supporting econobabble. A worthwhile discussion here: https://renegadeinc.com/meet-renegades-michael-hudson/

    @Luaan `ignoring waste` : Ignoring externalities is exactly the reason why economists think a constant economic growth is possible in a finite world.

    @luis.espinal Interplanetary expansion is no answer whatsoever. Exponential growth means you will periodically double your resource needs until you hit the hard limits. If you add another planet, that gives you one more period. Another period will take two more. Then four more. Eight more... it doesn't take long to consume the whole universe this way. Capitalism doesn't care either way - it's simply a way of managing a limited amount of resources; the actual *number* doesn't matter much. It works just as well on a desert island as it does for the galaxy.

    @Luaan - an answer doesn't need to be final or perfect. I'm saying that *expansion* will be capitalism's answer to the problem of planetary finite resources. No other "good/bad" analysis of that fact follows from the question. Debating whether that's a good approach (not mine, capitalism's), that's a different topic and question.

    Economic activity does not necessarily mean consuming finite resources. This is the basis of the idea of circular economy, which is probably the closest we can get to capitalism's 'answer'. (I was surprised to see no mention of it here.)

    @MaxBarraclough - this is a very interesting idea and it can certainly be developed into an answer.

    I don't believe that Capitalism is good at responding to disasters in a collectivist manner. However, one upside to unchecked Capitalism is that it seems to produce higher poverty rates, which actually decrease consumption. I've always had concerns that one of the few downsides to eliminating poverty is that it speeds-up consumption. Of course, consumption is only one of many factors in the total equation of resource conservation, reuse, and optimization. But I believe that free and accessible birth control might reduce consumption even better.

    -1 for the false premise (that capitalism requires constant growth) and for not showing how this problem is unique to capitalism. If people burn oil, it's going to run out no matter what political system is in force.

  • Trilarion

    Trilarion Correct answer

    2 years ago

    Not all parts of the economy consume finite resources equally. In fact, only a minor portion of it is related to the manufacturing of goods in the industrialized countries. Most of the economy there is services by now and, even more related to your question, most of the growth is growth in services there.

    Manufacturing is on the decline while capitalism thrives. (US)

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    Growth is growth in services. (UK)

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    In fact, there is plenty potential for services to grow even more. For example, if you live in a western country and you get older, you wish there were more service workers tending to elder people available. In principle, services can be very eco-friendly jobs with a relatively small resource usage per job. Let's think, for example, about doubling the number of teachers in schools, which could likely be done with little additional resource usage.

    However, this does not mean that globally the use of resources is stagnating. Many products consumed in the US are made in China and even working in services consumes resources. Resource usage is still very much increasing.

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    Some resources are renewable: food, energy, recycled materials (to some extent), wood, .... They can indeed be consumed on an ongoing basis up to the extent that they renew. However, that capacity is limited and other resources become depleted. If resources become scarce relative to their demand, they also become very expensive. There certainly is a desire to use the best available technologies to use existing resources as efficiently as possible with current research boosting the efficiencies further.

    Saving the planet mostly probably means using rather less than more of the resources. This means that on average jobs have to be much, much more resource efficient and that global manufacturing may decline, which would mean that for example people might use things for a longer time or live on smaller space. The shift to these eco-friendly jobs could happen quite automatically in capitalism, although also quite late. A reasonable mind would probably play it safer and additionally restrict the resource usage in capitalism before just to be on a safer side, i.e. with a tax on resource usage, or other related stuff.

    However, it is much too early to deduce the downfall of capitalism because of that. If I would be worried about capitalism, I would worry more about ongoing trends in artificial intelligence and automation.

    Summary: Capitalism would likely use up all available resources before a significant change happens. Only if resources (finite or renewable ones) become scarce, they will also become expensive. The world economy will then shift to labor that uses low amount of resources. These jobs will mainly be in services and within services only those who use low amounts of resources.

    Comments are not for extended discussion; this conversation has been moved to chat.

    This answer is good. The question assumes economic growth consumes resources. I would argue economic growth is turning resources into useful things (e.g. turning phone components into a cell phone, using a person with free time into a service). Aside from non-renewable energy sources (for which alternative sources exist), the assumption of resource consumption is faulty.

    @Underminer the existence of land fill rubbish dumps suggests a lot more than just energy sources are non-renewable. As of yet, no one has made phone components grow on trees.

    @Jontia That's all about the cost. When raw resources become scarcer, those landfills disappear over time (this has already happened many times in the past - e.g. platinum, gold, aluminum, ...). Sorting waste is expensive, and reclaiming the useful materials is also expensive. Don't expect the renewal efforts to really get started until the cost of the raw material approaches the cost of renewal. Everything is renewable in principle if you don't care about the cost; whether renewable is also *economical* is another matter entirely, and depends on alternatives. We still have many of those.

    @Luaan this kind of reasoning never says to whom the costs accrue. Yes, resources will be used more economically once they become expensive. But they won't easily become expensive as long as their already huge costs continue to be externalized to future generations and the least developed nations. Driving my SUV is cheap, because my kids will pay for it. Buying a new iPhone every year is affordable, because Malaysian workers can't afford what I afford. Once we internalize those costs, your reasoning will start to work.

    @henning Driving your SUV is cheap because there are huge subsidies on oil (among other things). But yes, externalities that aren't accounted for can make a significant part of the total costs, and can distort the image quite a bit. But the reason we don't account for those is that they're really hard to even estimate, much less correctly measure. What's the real cost of leaking a kg of carbon dioxide? How does it change with total release (it certainly isn't anywhere near linear!)? Are those Malaysian workers free or forced labour (if free, their life is well improved by the job)?

    @henning And of course, regardless of anything you do, people also make choices that hurt them in the long term. People make mistakes. And even though the huge economic growth since the industrial revolution is very much tied to the exploitation of fossil fuels, people clearly didn't become wealthier in proportion to the fossil fuel usage - some get much less than the average, some much more. Can you deprive people who didn't get a good chance to exploit them yet of their only way to improve their living conditions? Or do you think we should offset that by sending them free solar panels?

    @Luaan externalities are hard to measure, of course, and almost by definition. But that doesn't mean they don't exist. The fact that inhumane labour is indeed the "only way to improve their living conditions" for many people is at least partly an artificial constraint. Child labour in the US didn't disappear because it was no longer efficient to employ children, but because Americans decided to abolish it by law.

    @henning No, child labour disappeared exactly because it was inefficient. In particular, children and women were only used in factories because men weren't available - they were tied in various concessions, guilds etc. There were others, like coal miners etc., but that wasn't really a big number. Indeed, most of those kinds of labour laws are only enacted when they affect a tiny proportion of the workforce (work hours, minimal wage laws, social security, safety training...). And finally, what you call inhumane isn't necessarily what the workers themselves would call inhumane. Don't patronise.

    @Luaan I don't think it's patronizing to deplore if people can only 'chose' between starving and suffering.

    @henning So would it be better if they starved? If you deprive them of the choice, what else remains? Should they have the same wages and working conditions that you do? Who exactly presented them with the choice? Why are you the bad guy if you provide them with jobs, even if they're poor jobs? It's not like there's people lining up to invest in better quality jobs there - the alternative isn't better jobs, it's no jobs.

    @Luaan exactly, they should have better choices. The alternative shouldn't be between suffering and starving just so that my iPhone is cheap.

    "Manufacturing is on the decline while capitalism thrives" is simply not true. Manufacturing is *being imported from countries where it is rising* while capitalism thrives, and the graphs show *outsourcing*, not a decline. The finite resources are still being used, and much of those thriving services and construction sectors are built on trading or operating *imported* manufactured goods.

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Content dated before 7/24/2021 11:53 AM