A World Without Growth? | Kerr Financial
Kerr Market Summaries
A World Without Growth?
Category: Kerr Market Summaries

Economic growth, and the opportunity for human advancement that it proliferates, is the heartbeat of modern civilization. It underpins almost every aspect of society. It has been indispensable in furthering women’s rights, formalizing education, advancing medicine – it has improved the quality of life in even the world’s most impoverished regions. Yet in reality, economic growth is a relatively recent advent. It first took five centuries (from 1300 to 1800) for living standards to double. Throughout the entire Byzantine Empire, income per capita was at a nadir not seen since the dawn of the Christian Era. Most of Europe operated without any growth at all in the several hundred years preceding the Industrial Revolution. When economic growth began flourishing roughly 200 years ago, two factors controlled the helm – breakthrough innovation and a massive supply of carbon-based energy. However the planet’s capacity to support the latter has been overstretched. Today, as we stare down the barrel of a climactic upheaval that experts say is merely decades away, some environmental and economic leaders are suggesting the return to a zero-sum society – in essence, a world without growth.

12-15-15Indeed, the seemingly whipsawed proposal of halting growth is not just speculative fodder; it frequently appears in academic literature. The rationale is that exponential growth is rendering global climates inhospitable and cannot last forever in a finite world. Thus, after all the many centuries that societies functioned without growth, could modern life as we know it survive such an experience? According to New York Times economist Eduardo Porter the answer, unequivocally, is no.

We do not have to read Porter’s research to fathom that modern civilization could not succeed without market-based economies.  The daily exchanges and transactions that these economies rely on could not be executed in a zero-sum world. And even if we felt emboldened enough to try, studies from the American Enterprise Institute reveal the outrageous math involved – to moderate global warming to a maximum increase of 2°C by the year 2050, the world would have to emit less than six grams of carbon dioxide for every U.S. dollar of output. Today, the United States alone emits 60 times this amount. Furthermore, research from York University uncovered that in reality, zero growth would only barely influence climate change in Canada. To truly realize a difference, Canadians would have to wind income per capita levels back to 1976 and slash employment hours by 75%. This leads to the uniquely circular yet dichotomous argument: humanity cannot survive without market-based economies, yet neither can exponential growth in a finite world.

So if de-growth is not the answer, and neither is a return to Byzantium, what do we do about our fossil-fueled world? The good news is that fighting global warming need not be synonymous with the end of capitalism or investment. Porter points to another solution experts are pursuing, one that does not rely on burning carbon. Instead of asking ourselves how to minimize growth, the question should be: how do we develop and deploy sustainable energy sources that would accommodate a positive-sum world? The path toward climate stabilization and economic growth need not be dichotomous if we can transition towards renewable energy technologies that are cleaner, denser, more abundant and therefore cheaper. However the clock ticks, and while world leaders finally shook on a landmark climate deal between 200 countries over the weekend, they recognize that this agreement is among the most urgent and necessary for society to engage in. They also recognize the necessity for collaboration between public and private sectors – hence the launch of the Breakthrough Energy Coalition at the start of the conference. Composed of 28 high net worth investors including billionaires Bill Gates, Mark & Priscilla Zuckerberg, Jeff Bezos and Richard Branson, this group will invest in early-stage clean energy companies around the world, with the goal of sparking an investment revolution towards a zero-carbon energy future. Simply put, if our grandchildren are to inherit a sustainable world, we must first be willing to invest in one. With every challenge comes opportunity.

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