Not first since the recent Earth Summit in Rio de Janeiro there has been much talk about the need to make the world economy “green”. The problem with this mention, somewhat similar to “sustainability”, is that everyone has a different picture of what constitutes a “green” economy (thus the decision in Rio to leave the definition in the national domain…). Astonishingly many view the “green economy” as one that still relies on economic growth – but without all the negative side-effects, such as climate change and environmental degradation in general. This is the idea of “decoupling growth“. It is just as tempting as flawed.
Why are so many people – policy makers, economists, some environmentalists – so reluctant to give up the idea of a steadily growing economy? The reason is simple, but profound: our current economic system is completely dependent on growth. To see this, just remember what has happened to the world economy during the recent (and, according to some economists, still ongoing) crisis when growth slowed or even became negative in many countries. Unemployment, political and social unrest, debt crises have been the consequences. No wonder that many hope to solve the world’s environmental problems without risking a system overthrow (and a transition away from the growth-focus certainly would be one). Overthrows seldom are convenient and peaceful (or, in the economists’ language – Pareto improving) events. So, let us decouple growth from resource use – what seems complicated enough – and all will be fine. Right?
The answer is: no. It won’t be fine. The simple reason is that the decoupling of growth is physically impossible. Let me explain this: Economic growth has two components. One is quantitative: we can increase production by using more inputs. This is clearly the problem of today’s economic system and what the decoupling advocates would like to avoid – we already have approached a level of total resource use that is deeply unsustainable and puts the Earth’s ecosystems out of balance (climate change being only one of the challenges – consider the concept of “planetary boundaries” by Johan Rockström). So, decoupling is nothing else than restricting economic growth to the second, qualitative component: let us produce more while using the same amount (or even less) of resources. In other words, let us increase resource efficiency continuously.
Continuously rising efficiency? And this, at least implicitly, ad infinitum? There are at least two reasons why this approach cannot work. First, to increase efficiency we need innovations. As stressed by the Polish economist Stanisław Gomułka (in his The Theory of Technological Change and Economic Growth), there likely are limits to the innovative potential of an economy. At some point we won’t be able to produce innovations at fast enough a pace to offset capital depreciation/deterioration. Second, more importantly: the scope for efficiency increase has its physical limits. Whatever we shall be producing in the future, we always will need some materials (natural resources) and energy. It is a sheer impossibility to steadily economize on them. We may be able to lower the need for energy in a given production process by a factor of 5 or even 10. But what about 100? 1000? There is some limit that we likely are going to approach asymptotically – although we cannot know in advance where it lies.
The last point is of particular importance. Let us put the thoughts outlined above together: our current economic system is completely dependent on continuous economic growth. The quantitative component of growth clearly has no future. The qualitative one is constrained by physical limits, too (call it thermodynamics if you wish) – although we cannot know when we would reach these limits (or even whether we already have reached them). But if we reach them without having changed the way our economy functions before, it is likely to collapse.
The straightforward approach to this problem is precaution. We don’t know when “the bad” is likely to happen, but it is going to happen under business as usual, sooner or later. Precaution means in this case no less than a decoupling – not of growth from resources use, but of the economy from growth. In other words, there is an urgent need for reform of the economic system in such a way as to make it independent from growth. A blind reliance on continuous growth would be a fallacious act of suicide – like driving a car without sight. You may have luck and be able to survive such a drive for some minutes, but, sooner or later you are going to crash against a tree, a wall or a rock. It may be better in this situation to stop driving.