GMO Commentary- Sustainability or Bust: The Sheer Impossibility of Eternal Compound Growth

Nothing Can Compound Forever

13 years ago now, in a quarterly letter, ¹ I made the point that if Egypt's population at the start of its run in say, 2500 BC, had gone on to 500 AD growing at a tiny 1% a year much less than the average population growth in my lifetime it would not have doubled (as it actually did), nor would it have grown by 30 times (which is 1% without compounding). No at a measly 1% compounded over 3,000 years, the original population of Egypt would have grown by a staggering 9 trillion times! (Check it for yourself!) You can see how compound growth and long timescales do not go together. How about physics? Using energy of any kind means you have to diffuse the waste heat all energy produces, the heat island effect, if you will. This effect is currently dwarfed by the great effectiveness of carbon dioxide and methane as greenhouse gases this year will be over 1.5C above the old pre-industrial level and the warmest year ever and that greenhouse effect represents 95% of the heating effect of human energy use, and the heat diffusion effect less than 5%. But if humanity were to keep up the last 250 years' 2.3% compound growth in energy use for just 450 more years, the heat diffusion effect alone this currently modest 5% would be enough to boil the oceans! ² No, eternal growth will not work. Sorry about that.

But even though the presence of natural limits has always been a completely rigorous argument, it has always been completely unsaleable to any material percentage of the public: who needs to consider mathematical or physical limits when we are armed with the infinite capacity of the human brain'? (I will argue as always that every civilization, Roman, Mayan, or Khmer, had our identical brains yet failed. Still, it's a very appealing thought that never seems to die off.)

Unsaleable or not though, here we go once again with the same old question: how could you grow forever on a finite planet? One of my very few economist heroes Kenneth Boulding did say over 70 years ago: Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist. ³ He was 90 years ahead of mainstream economics in recognizing the limitations and importance of energy and other resources. I say 90 years to allow economics 20 more years to get the point that to make bread you need wheat and heat, in addition to labor and capital. Mainstream economics decided back in the 1950s to basically ignore the limits imposed by natural resources and environmental services, including the downsides of waste products. In their methodology, capital, labor (and innovation, if you insist) were always going to be enough. Externalities were ignored and considered outside their equilibriums. It's only a question of price,' although quite soon, that may mean that only the very rich can pay the necessary price while the rest starve. Steady productivity gains do not buy you much time mathematically either, and are in any case mostly offset quickly by the Jevons effect: the cheaper the product, the more you use.

The Long Term Is Now

The blunt and unpleasant truth is that our civilization is already living beyond its means. We have overshot any possibility of a sustainable level. We are using up finite resources more quickly than technology is creating substitutes. We are crowding out nature and undermining its ability to provide us with hugely important services such as clean water, air, fertile land, biodiversity, and a generally healthy environment. In terms of the remaining sugar energy and other natural resources still available to our ongoing economic experiment in perpetual growth, we are beginning to notice increasing shortages and are feeling a little hungry. In the distance we can just about make out the rim of our petri dish.

Some will say that the case for limits is too long-term to worry about yet. I will argue here that we are already decades into the period where we are feeling the restraints of overshoot, of living beyond our means, and are already feeling the associated pain: increasing climate damage, floods, droughts, and fires in particular; increasing problems with agriculture; rapidly increasing problems with water availability; growing shortages of important resources; and most importantly and threateningly, the rapid increase in environmental toxicity and its effect on flora, fauna, and humans.

Some will also say that negative arguments in the past turned out to be false or exaggerated and were handled easily and therefore this series of negatives will be handled also. I have argued in the past, and will do so again, that their argument is wishful thinking and ahistorical: it flies in the face of a long history of civilizations, some much longer lived than ours, eventually failing, often mainly by living beyond their means and depending too much on hubris we have withstood so many threats and challenges, won so many wars, built so many aqueducts, that we will always pull through.' And they did pull through, over and over again, until one day they didn't. (Please read the opening to my 2013 paper, The Race of Our Lives, enclosed here in the Appendix).

Fasten Your Seatbelts: The Bumpy Road Begins

I know this story of limits to growth is one that no one wants to hear. As in really, really doesn't want to hear. We have all our hopes for ourselves and for our children tied up in a world where everyone gets to use more energy and more resources to lead steadily better lives, for the indefinite future, or if you prefer, forever. And let's agree that it is our increased use of these resources per capita that has led to better lives, or what has generally been perceived as better lives. Indeed, the long-term correlation between energy use and GDP growth is over 0.95 (see Exhibit 1). That is the equivalent of saying that since the industrial revolution which was really based on the introduction of fossil fuels into our economy almost all our gains have been dependent on increased resource use. Without new sources of effective energy, cheap and in vast quantities, there would have been very little science, and very little productivity. And without productivity, little capital would have been created, and labor without capital would have remained as near useless by modern standards as it was in 1750, with just a few windmills and canals.

But happily, for my generation in particular (the old fogeys), we did have growing access to cheap fossil power, and through that, to mining more cheap materials. So we prospered, by conventional measurements.

Resource Limitations

But even as we prospered, early signs of finite limits began to surface. From the 1970s oil crisis onward, energy prices clearly stopped dropping, and this was followed (around 2000) by the prices of a broad range of commodities starting to rise. This was a dramatic shift, for on average the real prices of these same commodities (i.e., after inflation) had fallen by 70% over the previous 100 years, albeit with great volatility around the two world wars and the OPEC crisis.

Just as we began to notice the limits to the availability of cheap resources, environmentalists also began to complain that the unprecedented post-WW2 global growth was continuously damaging nature: chopping it down, bulldozing it, eroding it, and poisoning it with waste and chemical toxins. We also began to calculate the economic and health benefits of a fully functioning natural system that we were beginning to lose. Environmental economists calculated that fully costed natural services services, that is, like fresh water and healthy soil might have an economic value equal to or greater than global GDP. ⁴ If that is even half true, then our calculated GDP growth is an overstatement. Our best guess is that environmental damage amounts to at least 40% of stated GDP gains and possibly very much more. If all new production were calculated a la Hicks, ⁵ that is, only after the costs of leaving all assets including the entire natural system in the same state as it was found, then we have probably only been making modest forward progress in GDP for a few decades, and possibly none at all.

Waste and Toxicity

Together with the unprecedented global growth of population and GDP after WW2, and with the even larger growth in raw materials necessary to sustain that, came an equally unprecedented rise in waste: waste from mining and oil drilling with associated toxicity and loss of natural habitat; waste in terms of used up products and their packaging; waste greenhouse gases and particulate matter from fossil fuels with all that involves for damage to climate and human health; and the unexpectedly large damage from plastic waste. Even old-fashioned wastefulness in consumption and general lifestyle increased by orders of magnitude since 1945.

Plastic production was particularly seductive. Plastics appear at one level to make our lives easier and better. But below the surface their commercial virtue of indestructibility has become an increasing vice as ultra-persistent plastics have rapidly accumulated, and have been slowly broken down into smaller and smaller pieces becoming steadily more dangerous along the way. Finally, as nanoplastics, they are everywhere and in everything: absorbed by almost all life forms, now found even in our brains, ⁶ from the ice cap of Greenland ⁷ to the oceans and all their myriad life forms from plankton to whales. ⁸ Meanwhile, as our emissions of greenhouse gases mainly CO2, methane, and nitrous oxide grow exponentially, they have come to fill enough of the atmosphere to cause now rapidly rising temperatures, which in turn create surging fires, droughts, and floods. Waste and toxic chemicals many permanently indestructible in nature and produced in almost unimaginable variety (350,000 types ⁹ ) and quantity (2,400 million tons per year ¹⁰ ) as with plastics, permeated everything, even rain! ! The net effect of all this has been to poison our entire global habitat and threaten the long-term survival of all life forms, notably including ours.

This toxicity has led human sperm counts to fall by more than half in the last 50 years, ¹¹ with similar results for testosterone, ¹² along with measurable increases in miscarriages, ¹³ and now widely remarked-upon declines in sexual activity across the developed world. It is a major underrecognized contributor to falling birthrates globally.

Agricultural Problems

Big Ag in the U.S., a consortium of vested interests of giant corporations producing fertilizer, seed, and pesticides (etc.), along with large buyers and government institutions like the USDA that are largely controlled by the giant corporate oligopoly, have created a system in which the growth in fertilizer and pesticide use has outpaced practically any other measure of general growth like population or income. Exhibit 2 shows the tonnage increase.

Continue reading with charts here.

This article first appeared on GuruFocus.