Deep Economy: The Wealth of Communities and the Durable Future (Hardcover)

 

After Growth

 

For almost all of human history, said the great economist John Maynard Keynes, from “say, two thousand years before Christ down to the beginning of the eighteenth century, there was really no great change in the standard of living of the average man in the civilized centers of the earth. Ups and downs, certainly visitations of plague, famine and war, golden intervals, but no progressive violent change.” At the utmost, Keynes calculated, the standard of living had increased 100 percent over those four thousand years. The reason was, basically, that we didn’t learn how to do anything new. Before history began we’d learned about fire, language, cattle, the wheel, the plow, the sail, the pot. We had banks and governments and mathematics and religion.1

 

And then, in 1712, something new finally happened. A British inventor named Thomas Newcomen developed the first practical steam engine. He burned coal, and used the steam pressure built up in his boiler to drive a pump that, in turn, drained water from coal mines, allowing them to operate far more cheaply and efficiently. How much more efficiently? His engine replaced a team of five hundred horses walking in a circle.2 And from there—well, things accelerated. In the words of the economist Jeffrey Sachs, “The steam engine marked the decisive turning point of human history.” Suddenly, instead of turning handles and cranks with their own muscles or with the muscles of their animals (which had in turn to be fed by grain that required hard labor in the fields), men and women could exploit the earth’s storehouse of fossilized energy to do the turning for them. First coal, then oil, then natural gas allowed for everything we consider normal and obvious about the modern world, from making fertilizer to making steel to making electricity. These in turn fed all the subsidiary revolutions in transportation and chemistry and communications, right down to the electron-based information age we now inhabit. Suddenly, one-hundred-percent growth in the standard of living could be accomplished in a few decades, not a few millennia.

 

In some ways, the invention of the idea of economic growth was almost as significant as the invention of fossil fuel power. It also took a little longer. It’s true that by 1776 Adam Smith was noting in The Wealth of Nations that “it is not the actual greatness of national wealth, but its continued increase” which raises wages. But, as the economist Benjamin Friedman points out in The Moral Consequences of Economic Growth, his recent and compelling argument for economic expansion, it’s “unclear whether the thinkers of the mid-18th century even understood the concept of economic growth in the modern sense of sustained increase over time,” or whether they thought the transition to modern commerce was a onetime event—that they’d soon hit a new plateau.3 The theorists didn’t control affairs, though; and the dynamic entrepreneurial actors unleashed by the new economic revolution soon showed that businesses could keep improving their operations, apparently indefinitely. By the early twentieth century, increasing efficiency had become very nearly a religion, especially in the United States, where stopwatch-wielding experts like Frederick Taylor broke every task into its smallest parts, wiping out inefficiencies with all the zeal of a pastor hunting sins, and with far more success. (Indeed, as many historians have noted, religious belief and economic expansion were soon firmly intertwined: “economic effort, and the material progress that it brought, were central to the vision of moral progress,” notes Friedman.)4 Soon, as Jeremy Rifkin observes, the efficiency revolution encompassed everything, not just factory work but homemaking, schoolteaching, and all the other tasks of modern life: “efficiency became the ultimate tool for exploiting both the earth’s resources in order to advance material wealth and human progress.” As the nation’s school superintendents were warned at a meeting in 1912, “the call for efficiency is felt everywhere throughout the length and breadth of the land, and the demand is becoming more insistent every day.” As a result, “the schools as well as other business institutions, must submit to the test of efficiency.”5 It was a god from whom there was no appeal.

 

Even so, policy makers and economists didn’t really become fixated on growing the total size of the economy until after World War II. An economic historian named Robert Collins recently described the rise of what he called “growthmanship” in the United States. During the Great Depression, he pointed out, mainstream economists thought the American economy was “mature.” In the words of President Franklin D. Roosevelt, “our industrial plant is built. . . . Our last frontier has long since been reached. . . . Our task now is not discovery or exploitation of natural resources, or necessarily producing more goods. It is the soberer, less dramatic business of administering resources and plants already in hand . . . of adapting economic organizations to the service of the people.” It was left to former president Herbert Hoover to protest that “we are yet but on the frontiers of development,” that there were “a thousand inventions in the lockers of science . . . which have not yet come to light.” And Hoover, of course, did not carry the day. Even a decade later, as the country began to emerge from hardship with the boom that followed Pearl Harbor, many businessmen—the steelmakers, the utility executives, the oilmen—were reluctant to build new plants, fearing that overproduction might bring on another depression.

 

But they were wrong. Mobilization for war proved just how fast the economy could grow; by 1943, even in the midst of battle, the National Resources Planning Board sent this report to Roosevelt: “Our expanding economy is likely to surpass the wildest estimates of a few years back and is capable of bringing to all of our people freedom, security and adventure in richer measure than ever before in history.” From that point on, growth became America’s mantra, and then the world’s. Hoover had been right—there were all kinds of technological advances to come. Plastics. Cars that kept dropping in price. Television. Cheap air-conditioning that opened whole regions of the country to masses of people.

 

Per capita gross national product grew 24 percent between 1947 and 1960, and during that year’s presidential election John F. Kennedy insisted he could speed it up if the voters would only reject “those who have held back the growth of the U.S.” Indeed, he proved correct: between 1961 and 1965, GNP grew more than 5 percent a year while the percentage of Americans living in poverty dropped by nearly half. Economists scrambled to catch up, and in doing so they built the base for modern growth theory. The general mood was captured by Lyndon Johnson, who, not long after moving into the White House, told an aide: “I’m sick of all the people who talk about the things we can’t do. Hell, we’re the richest country in the world, the most powerful. We can do it all. . . . We can do it if we believe it.” And he wasn’t the only one. From Moscow Nikita Khrushchev thundered, “Growth of industrial and agricultural production is the battering ram with which we shall smash the capitalist system.”

 

There were hiccups along the way, as Robert Collins points out in his account. LBJ’s belief that we could do anything led us deep into Vietnam, which in turn led us into inflation and recession. The oil shocks of the 1970s and the spectacles of burning rivers and smoggy cities led some, even outside what was then called the counterculture, to question the idea of endless expansion. In 1972, a trio of MIT researchers published a series of computer forecasts they called Limits to Growth, and a year later the German-British economist E. F. Schumacher wrote the best-selling Small Is Beautiful, with its commitment to what he called “Buddhist economics” and its exhortation to people to “work to put our own inner house in order.” (Four years later, when Schumacher came to the United States on a speaking tour, Jimmy Carter even received him at the White House.) By the end of the 1970s, their message resonated: the sociologist Amitai Etzioni reported to President Carter that 30 percent of Americans were “pro-growth,” 31 percent were “anti-growth,” and 39 percent were “highly uncertain.”

 

That kind of ambivalence, Etzioni predicted, “is too stressful for societies to endure,” and in 1980 Ronald Reagan’s election proved his point. Reagan convinced us it was “Morning in America” again, and under various banners—supply-side economics, globalization—it has stayed morning ever since. Out with limits, in with Trump. The collapse of communism drove the point home, and now mainstream liberals and conservatives compete mainly on the question of what can flog the economy faster.6 The British prime minister Margaret Thatcher used to use the acronym TINA to underscore her contention that There Is No Alternative to a world fixated on growth.7 But conservatives weren’t the only ones enamored of growth. Lawrence Summers, who served as Bill Clinton’s secretary of the Treasury, put it like this: the Democratic administration “cannot and will not accept any ‘speed limit’ on American economic growth. It is the task of economic policy to grow the economy as rapidly, sustainably, and inclusively as possible.”8 (Emphasis added.) Even that was not enough—in the vice presidential debates during the 1996 campaign, Republican Jack Kemp shouted, “We should double the rate of growth.”9

 

People kept seeing new opportunities for faster growth: microtechnology, nanotechnology. (Sometimes the speeding up is literal: “microediting,” for instance, now allows call centers and radio stations to edit out pauses and speed up speech with no discernible changes. “We call it the 66-second minute,” the president of one firm said recently. “In normal conversation only a small part of the brain is taxed.”10) The evangelism for efficiency and growth grew louder, too. It was not just, as Benjamin Friedman insists, that a growing economy gets us more stuff—“better food, bigger houses, more travel”—but that it makes us better people: more open, more tolerant, more confident.11 The “quality of our democracy—more fundamentally, the moral character of American society—is at risk,” he said, unless we grow the economy more vigorously.12 As the new millennium began, growth had become the organizing ideology for corporations and individuals, for American capitalists and Chinese communists, for Democrats and Republicans. For everyone. “Harnessing the ‘base’ motive of material self-interest to promote the common good is perhaps the most important social invention mankind has achieved,” said Charles Schultze, a former chair of the president’s Council of Economic Advisers.13 George Gilder, the fervent apostle of tech-driven high-growth economics, went further: entrepreneurs, he said, “embody and fulfill the sweet and mysterious consolations of the Sermon on the Mount.”14 The so-called Washington consensus dominated far more of the world than the Union Jack ever had; it was an empire of the mind.

 

And it is easy to understand why. For one thing, under present arrangements any faltering of growth leads quickly to misery: to recession and all its hardships. For another, endless growth allows us to avoid hard choices, to reconcile, in Collins’s words, the American “love of liberty with its egalitarian pretensions.”15 The administration of George W. Bush assures us that we can have tax cuts and still protect Social Security because the tax cuts will stimulate economic growth so much that we’ll have more than enough cash on hand to take care of our old. No need to choose. Having found what has been truly a magic wand, the strong temptation is to keep waving it.

 

But, as readers of fairy tales know, magic can run out. Three fundamental challenges to the fixation on growth have emerged. One is political: growth, at least as we now create it, is producing more inequality than prosperity, more insecurity than progress. This is both the most common and least fundamental objection to our present economy, and I will spend relatively little time on it. By contrast, the second argument draws on physics and chemistry as much as on economics; it is the basic objection that we do not have the energy needed to keep the magic going, and can we deal with the pollution it creates? The third argument is both less obvious and even more basic: growth is no longer making us happy. These three objections mesh with each other in important ways; taken together, they suggest that we’ll no longer be able to act wisely, either in our individual lives or in public life, simply by asking which choice will produce More.

 

let’s begin with the simplest objection, the one that fits most easily into our current political debates. Though our economy has been growing, most of us have relatively little to show for it. The median wage in the United States is the same as it was thirty years ago.16 The real income of the bottom 90 percent of American taxpayers has declined steadily: they earned $27,060 in real dollars in 1979, $25,646 in 2005.17 Even for those with four-year college degrees, and even though productivity was growing faster than it has for decades, earnings fell 5.2 percent between 2000 and 2004 when adjusted for inflation, according to the most recent data from White House economists.18 Much the same thing has happened across most of the globe; in Latin America, for instance, despite a slavish devotion to growth economics, real per capita income is the same as a quarter century ago. More than eighty countries, in fact, have seen per capita incomes fall in the last decade.19

 

The mathematics that makes possible this seeming contradiction between rapid growth and individual stagnation is the mathematics of inequality. Basically, almost all the growing wealth accumulates in a very few (silk-lined) pockets. The statistics are such that even an arch-conservative commentator like Dinesh D’Souza calls them “staggering.”20 Between 1997 and 2001, according to a pair of Northwestern University economists, the top 1 percent of wage earners “captured far more of the real national gain in income than did the bottom 50 percent.”21 Economists calculate a “Gini coefficient” to measure income inequality across a society; the U.S. coefficient has risen steadily since the late 1960s, to the point where many economists believe wealth is more stratified today than any time since the Gilded Age. And that gap will continue to grow: the 2006 round of tax cuts delivers 70 percent of its benefits to the richest 5 percent of Americans, and 6.5 percent to the bottom 80 percent.22

 

Economists can’t explain all the underlying reasons for this spreading gap. The decline of unions had something to do with it, and so did the advent of computerization. Clearly, in a globalized economy, workers in the rich world now find themselves competing with far more people than they used to—and since per capita income is $1,700 in China, it will be a long time before that playing field levels. With the spread of the Internet, the number of jobs that can be transferred across continents has grown exponentially. Beyond all that, though, there’s the simple ideology of growth. Bill Clinton signed us up for the North American Free Trade Agreement (NAFTA), the General Agreement on Tariffs and Trade (GATT), and all the rest with the promise that international trade would spur efficiency and thereby increase growth. George W. Bush sold his massive tax cut with the argument that it would “get the economy moving.” Every argument for raising minimum wages or corporate taxes, on the other hand, meets the response that such measures would stifle our economic growth. Growth is always the final answer, the untrumpable hand, and its logic keeps inequality growing, too.

 

Any debate on these issues has been muffled in the last few decades; the growth consensus usually carried the day without much trouble, in part because elite journalists and pundits found themselves on the happy side of the economic chasm. The extremes have become so enormous, though, that debate can’t help but emerge, even if only by accident. Take, for example, the juxtaposition of two stories on a recent front page of the New York Times. One concerned the record-setting Christmas bonuses Wall Street executives had received. It quoted a real estate broker who said clients were suddenly shopping for apartments in “the $6 million range” instead of contenting themselves with $4 million digs. “One senior trader is building a sports complex for triathlon training at his house in upstate New York,” the article reports. “It will include a swim-in-place lap pool, a climbing wall, and a fitness center.” Another investment banker seemed flummoxed by his windfall: “‘I have a sailboat, a motor boat, an apartment, an SUV. What could I possibly need?’ After brief reflection, however, he continued: ‘Maybe a little Porsche for the Hamptons house.’”23 Meanwhile, a few columns away, there was a picture of a Mexican farmer in a field of sickly tomatoes. His small cooperative, post-NAFTA, had tried to sell its produce to the global supermarket giants like Ahold, Wal-Mart, and Carrefour, which had moved into the country with their vast capital and their vast commitment to efficiency. Lacking the money to invest in greenhouses and pesticides, however, he and his neighbors couldn’t produce the perfectly round fruit the chains’ executives demanded. “The stark danger,” the reporter Celia Dugger notes, “is that millions of struggling small farmers . . . will go bust and join streams of desperate migrants to America and to the urban slums of their own countries.” She closes her story by interviewing José Luis Pérez Escobar, who after twenty years as a Mexican potato farmer, went under and then left for the United States, without his wife and five children. He now earns $6 an hour, working the graveyard shift tending grass at a golf course.24 Alongside the exhilaration of the flattening earth celebrated by Thomas Friedman, the planet (and our country) in fact contains increasing numbers of flattened people, flattened by the very forces that are making a few others wildly rich.

 

Even when the question of inequality has been engaged, though, the standard liberal line is to question not expansion but only the way that the new money is spread around. Left-wing “social critics continue to focus on income,” says the sociologist Juliet Schor. “Their goals are redistribution and growth.”25 In fact, critics in the Democratic party and the union movement typically demand even faster growth. They’re as intellectually invested in the current system as the average CEO.

 

I agree with the argument for fairness, that we should distribute wealth more equitably both here and around the globe. (In fact, there’s persuasive evidence that if all you cared about was growth, the best way to speed it up would be to redistribute income more fairly.) And it’s extremely important to bear in mind that we’re not, despite the insistence of our leaders, growing wealthier; that is one of several stubborn and counterintuitive facts about the world that will stud this book, undergirding its argument. Growth simply isn’t enriching most of us.

 

But I’m not going to tarry long here, because I also think that a program of redistribution, however wise or moral, will do relatively little to deal with the even more fundamental, and much less discussed, problems that a growth-centered, efficiency-obsessed economy faces. It’s to those problems, and to the physical world, that we now turn.

 

it’s useful to remember what thomas newcomen was up to when he launched the Industrial Revolution. He was using coal to pump water out of a coal mine. The birth of the Industrial Revolution was all about fossil fuel, and so, in many ways, was everything that followed. We’ve learned an enormous amount in the last two centuries—our body of scientific knowledge has doubled so many times no one can count—but coal and oil and natural gas are still at the bottom of it all.

 

And no wonder. They are miracles. A solid and a liquid and a gas that emerge from the ground pretty much ready to use, with their energy highly concentrated. Of the three, oil may be the most miraculous. In many spots on the face of the earth, all you have to do is stick a pipe in the ground and oil comes spurting to the surface. It’s compact, it’s easily transportable, and it packs an immense amount of energy into a small volume. Fill the tank of my hybrid Honda Civic with ten gallons—sixty pounds—of gasoline and you can move four people and their possessions from New York to Washington, D.C., and back. Coal and gas are almost as easy to use, and coal in particular is often even cheaper to recover—in many places it’s buried just a few feet beneath the surface of the earth, just waiting to be taken.

 

That simple, cheap, concentrated power lies at the heart of our modern economies. Every action of a modern life burns fossil fuel; viewed in one way, modern Western human beings are flesh-colored devices for combusting coal and gas and oil. “Before coal,” writes Jeffrey Sachs, “economic production was limited by energy inputs, almost all of which depended on the production of biomass: food for humans and farm animals, and fuel wood for heating and certain industrial processes.”26 That is, energy depended on how much you could grow. But fossil energy depended on how much had grown eons before, on all those millions of years of ancient biology squashed by the weight of time till they’d turned into strata and pools and seams of hydrocarbons, waiting for us to discover them.

 

To understand how valuable, and how irreplaceable, that lake of fuel was, consider a few figures. Ethanol is one modern scientific version of using old-fashioned “biomass” (that is, stuff that grows anew each year) for creating energy. It’s quite high-tech, backed with billions of dollars of government subsidy. But if you’re using corn, as most American ethanol production does, then by the time you’ve driven your tractor to plant and till and harvest the corn, and your truck to carry it to the refinery, and then powered your refinery to turn the corn into ethanol, the best-case “energy output-to-input ratio” is something like 1.34 to 1. That is, you’ve spent 100 BTU of fossil energy to get 134 BTU of ethanol. Perhaps that’s worth doing, but as Kamyar Enshayan of the University of Northern Iowa points out, “It’s not impressive. The ratio for oil (from well to the gas station) is anywhere between 30 and 200,” depending on where you drill.27 To go from our fossil fuel world to that biomass world would be a little like going from the Garden of Eden to the land outside its walls, where bread must be earned by “the sweat of your brow.”

 

And east of Eden is precisely where we may be headed. As everyone knows, the last three years have seen a spate of reports and books and documentaries insisting that humanity may have neared or passed the oil peak—that is, the point where those pools of primeval plankton are half used up, where each new year brings us closer to the bottom of the bucket. The major oil companies report that they can’t find enough new wells most years to offset the depletion of their old ones; worrisome rumors circulate that the giant Saudi fields are dwindling faster than expected; and, of course, all this is reflected in the rising cost of oil. The most credible predict not a sharp peak but a bumpy ride for the next decade along an unstable plateau, followed by an inexorable decline in supply. So far that seems to be spot-on—highly variable prices, trading higher over time.

 

One effect of those changes, of course, can be predicted by everyone who’s ever sat through Introductory Economics. We should, theory insists, use less oil, both by changing our habits and by changing to new energy sources. To some extent that’s what has happened: SUV sales slowed once it appeared high gas prices were here to stay, and the waiting lists for Toyota Priuses were suddenly six months long. Buses and subways drew more riders. People turned down their thermostats a touch, and sales of solar panels started to boom. This is a classic economic response. But it’s hard for us to simply park our cars, precisely because cheap oil coaxed us to build sprawling suburbs. And Americans can switch to hybrids, but if the Chinese and the Indians continue to build auto fleets themselves, even if they drive extremely small cars, then the pressure on oil supplies will keep building. Meanwhile, solar power and the other renewables, wondrous as they are, don’t exactly replace coal and oil and gas. The roof of my home is covered with photovoltaic panels, and on a sunny day it’s a great pleasure to watch the electric meter spin backward, but the very point of solar power is that it’s widely diffused, not compacted and concentrated by millennia like coal and gas and oil.

 

It’s different: if fossil fuel is a slave at our beck and call, renewable power is more like a partner. As we shall eventually see, that partnership could be immensely rewarding for people and communities, but can it power economic growth of the kind we’re used to? The doctrinaire economist’s answer, of course, is that no particular commodity matters all that much, because if we run short someone will have the incentive to develop a substitute. In general, this has proved true in the past—run short of nice big sawlogs and someone invents plywood—but it’s far from clear that it applies to fossil fuel, which in its ubiquity and its cheapness is almost certainly a special case. Wars are fought over oil, not over milk, not over semiconductors, not over timber. It’s plausible—indeed, it’s likely—that if we begin to run short, the nature of our lives may fundamentally change as the scarcity wreaks havoc on our economies. “The essence of the first Industrial Revolution was not the coal; it was how to use the coal,” insists Jeffrey Sachs.28 Maybe he’s right, but it seems more likely that fossil fuel was an exception to the rule, a onetime gift that underwrote a onetime binge of growth. In any event, we seem to be on track to find out.

 

Copyright © 2007 by Bill McKibben. All rights reserved.