The Myth of Exponential Growth

It's simple, really. For much of my professional life, I've taught introductory calculus to college students, and in Calc I, we learn a basic principle that apparently no politician (OK, Elizabeth Warren excepted) or mainstream economist understands.
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In the last post, I came out of the closet. I'm an Occupier. For most of the past two years of my affiliation with Occupy Harrisonburg (#OHB), I've participated in its small but vibrant Economics Working Group (EWG). I've never before had any interest in economics, nor have I any expertise. So what drew me in?

It's simple, really. For much of my professional life, I've taught introductory calculus to college students, and in Calc I, we learn a basic principle that apparently no politician (OK, Elizabeth Warren excepted) or mainstream economist understands.

One of the first powerful applications of calculus, accessible to every college freshman, is the notion of exponential growth and decay. When politicians or economists chant their mantra -- we must GROW the economy -- they implicitly assume that our economy can grow exponentially into perpetuity. So enamored are economists of growth that during recessions they often refer to "negative growth" rather than contraction.

The exponential-growth model fits a host of everyday phenomena: the explosive increase of bacteria that sours milk; the initial growth of unstressed populations, in general; the accumulation of interest on investments compounded continuously. However, in no real-world scenario can exponential growth be sustained indefinitely, because growth implies increased consumption of resources, and resources are always limited. When a biological population has to compete for scarce resources, its growth slows, stops, or reverses. Indeed, the sustained exponential growth of almost anything is pathological. Sustained growth of a population, for example, is a population explosion, and sustained exponential growth of cells in the body is cancer.

From 1947 to 2013, the GDP of the American economy grew at an average 3.2 percent per annum. Economists often refer to growth at less than that rate as "anemic." Yet, at this seemingly modest rate, the size of the economy doubles every 22 years, quadrupling in 44 years, and expanding by a factor of 8 in less than three generations. Such growth demands commensurate doubling, quadrupling, and octupling of the energy sources and raw materials that feed the economy. On an earth with finite resources, exponential growth trajectories are unsustainable.

In 2003, The Global Footprint Network (GFN) was established to track the ecological footprint of humans, nation by nation. The GFN estimates that global consumption exceeded the sustainability threshold in 1971. Current average global consumption is 1.6 times what is sustainable. Americans, God love us, consume at a rate 4 times what is sustainable.

Excessive consumption drives the American economy, which in turn is predicated on the fallacious premise that exponential economic growth can be sustained indefinitely. What I find astounding is how few people "get" this fundamental law of nature and Calc I: nothing grows exponentially forever. In the words of Kenneth Boulding, the late Quaker economist: "Anyone who believes in indefinite growth of anything physical on a physically finite planet is either a madman or an economist."

Certainly no congressional Republican understands this basic constraint, for they all inhabit an alternative universe where 47 percent of Americans are freeloaders, the market always knows best, oil will last forever, and climate change is a conspiracy by scientists who want one-world government.

What's really troubling though is how few otherwise enlightened people get it. For example, President Obama responded thusly when asked by The New York Times about climate policy immediately following his reelection, fresh in the wake of Hurricane Sandy: "[W]e're [not] going to ignore jobs and growth [emphasis added] simply to address climate change.''

Consider also former Labor Secretary Robert Reich, a hero of mine. He's smart and funny. His heart is in the right place, and he can explain any complicated economic concept with utter clarity in two minutes or less. He's a national treasure whose new documentary Inequality for All exposes the truth about class in this supposedly class-less society. Still, in 2012 Reich posted an article entitled: "Why a Fair Economy is Not Incompatible with Growth [emphasis added] But Essential To It." And in an April 2013 article on The Huffington Post, he sang the praises of government spending to stimulate... well... growth.

Fortunately many economists not in the mainstream do get it and are working tirelessly to lay the foundations of a sustainable new economic model that can be constructed on the ashes of our hopelessly flawed one. Herman Daly presciently laid the foundations of the economic future 40 years ago in Toward a Steady-State Economy. Two institutions that are currently leading the way toward economic viability are the New Economics Institute in the U.S. and the New Economics Foundation in the UK. We Americans can ease the economic disruptions we are certain to experience in the future by shifting now from a "standard of living" paradigm to a "quality of life" paradigm. It is entirely possible to lead a better quality life with much less, particularly if it is more equitably distributed and if the commons is healthy. If you don't believe me, spend some time in Denmark, Norway, or Germany.

The 2008 economic meltdown has many culprits: financial deregulation, predatory lenders, risky financial products, and old-fashioned greed. But the sense of Occupy Harrisonburg's EWG is that the latest meltdown was unique. It resulted from an inevitable collision between an insatiable economic model and a finite planet whose resources are stretched to the hilt.

OHB is not alone in its view. For a short and absolutely compelling look at the interrelationships among the three E's -- economy, energy, and environment -- read the spanking-new paper (Sept. 30, 2013) of Asher Miller, Executive Director of Post Carbon Institute, and Rob Hopkins, Co-Founder of the Transition Network. Their landmark paper is titled "Climate After Growth: Why Environmentalists Must Embrace Post-Growth Economics and Community Resilience."

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