Economically, the end may be extremely nigh
THE END OF GROWTH
Random House, 288 pp.
It could be the end of the world as we know it.
The end of a world with economic growth, that is.
That’s what you’re likely to think if you’ve been listening to the increasingly desperate chorus of world leaders who, if they agree on nothing else, speak as one on the global economic crisis: whatever the problem, growth is the answer.
So thoroughly have the world’s economies become reliant on growth that should it disappear, economic and social chaos will be inevitable. Nervous presidents and prime ministers everywhere are looking at the tempest in Greece and the implosion of the economies of Spain, Portugal and Italy as harbingers of what’s in store should the promised growth fail to materialize.
On the other hand, if you believe the title of Jeff Rubin’s new book The End of Growth , we had all better hope someone out there has a Plan B. Part analysis, part warning and part prescription, the second book by the former chief economist of CIBC World Capital portends a new global normal in which energy will be so costly that economic growth — a function of energy consumed — will end.
It’s not a supply problem, writes Rubin, contradicting the peak-oil theorists. Rather, “continually replacing cheap conventional crude with more expensive unconventional oil is shifting the industry’s cost curve to a place our economies simply can’t afford.”
Oil is the key, Rubin explains, because nothing can replace it as a transportation fuel and transportation is the keystone of the global economy. Not only is oil itself easily transported and stored, but “most critically, it packs an unparalleled amount of energy into a tiny package.” So, even as vast new reserves of methane are being discovered and solar and wind capacity grow steadily, none of these can replace oil (and its various byproducts like gas, diesel and jet fuel) to move us and our cargo around the world.
“The price of oil is the single most important ingredient in the outlook for the global economy,” he writes. “Feed the world cheap oil and it will run like a charm. Send prices to unaffordable levels and the engine of growth will immediately seize up.”
The book is divided into two sections. In part one, Rubin explains why the vitality of the global economy is so closely and deeply linked to oil prices and why, even as world events buffet oil prices up and down, the long-term trend for oil is irreversibly upward. Triple-digit oil prices are needed, he says, to make recovering it from increasingly harsh and isolated locations viable.
The end of growth is coming — we’ve known this since Malthus first predicted it at the end of the 17th century; it’s only been a matter of time. Rubin builds a convincing case to show that the critical variable, the one irreplaceable commodity whose scarcity actually will end growth, is oil. From plastics, to pharmaceuticals, to fertilizer, to gasoline, never before in history has one product been as essential to human well-being as oil is to ours.
But in part two the wheels fall off, as Rubin ponders the notion of a static economy, drawing on experiences from Denmark, Germany and Japan as examples of adaptive strategies countries have implemented to deal with high energy prices. Danes, for example, have been paying high energy taxes for years, drastically reducing per capita consumption while girding the economy and citizens expectations. In Germany, employers, financed by government subsidies, have instituted Kurzarbeit (job sharing) as a means of keeping more people employed. The Japanese, meanwhile, have used drastic conservation measures to slash energy consumption since the nation’s nuclear plants were taken offline in the aftermath of the 2011 tsunami and the Fukushima reactor meltdown.
While admirable, if not inspiring, these strategies are simply inadequate to the task should growth “immediately seize up” as Rubin predicts. Share jobs? How far can one car manufacturing wage go when no one is buying cars? And with whom will all the former employees of the financial services, real-estate and stock market sectors share jobs with as those growth-dependent industries shrivel to nothing? And what about the millions of newly unemployed Chinese and Indian factory workers whose livelihoods will vanish? Rubin’s error is that he sees the post-growth economy essentially the same as the growth economy, only smaller.
It’s not that steady state economics (which has been theorized for decades) couldn’t work, the problem is it is based on a set of principles emphasizing environmental limits which are fundamentally incompatible with those now in play. And there’s no easy pathway from here to there. We are simply not equipped to not have growth. Think of a world with 200 countries all in the same boat as Greece, trying to avoid massive civil unrest as the world’s growth economies confront the new normal.
There are silver linings, says Rubin. No growth means burning fewer fossil fuels, meaning lower carbon emissions, meaning cleaner skies and reduced danger from global warming. We’ll have more leisure time and our attitude toward consumption will change.
Maybe, but in the end Rubin’s analysis disregards the most important thing we can do: instead of waiting for the economy to slap us silly, we can act collectively to insist governments and industry begin moving in a positive direction to avert or minimize the agony the looming transition from growth to no growth will surely inflict.