The end of growth

Written By: - Date published: 9:13 am, June 14th, 2012 - 26 comments
Categories: capitalism, Deep stuff, Economy, Environment, sustainability - Tags: , , ,

Economic commentators are now openly speculating about “the D-word” – Depression. Even our own Treasury are in on the act:

Eurozone ‘depression’ possible – Treasury

The head of Treasury, the Government’s chief economic adviser has gone where few others dare to venture. He used the word depression to describe how bad Europe’s economic woes could become. A depression is a far more alarming, and longer lasting crisis, than just a recession. …

Unlike a short recession, a depression is a sustained period of downturn, with huge job losses, a shortage of credit, and less trade with countries defaulting. And all that is already happening in Europe.

But late today Mr Makhlouf backed away from his comments, saying he never meant depression with a capital D, he says he meant it with a small d and that the worst case is a slowdown in world trade and slower economic activity.

Sounds like Mr Makhlouf got an irate call from someone, but calling it depression with a small “d” isn’t going to make any difference. The world economy is in turmoil, and likely to get worse. The effects are going to last for the foreseeable future:

And Mr Makhlouf said the fallout from Europe will affect us all for up to 10 years. The most depressing feature of the current crisis is that we have entered a world where the uncertainty and fragility of the world economy will carry on for 5 to 10 years.

Finance Minister Bill English said later we could be in for 15 years of grumpy growth

“Grumpy growth” sounds like fun doesn’t it. And fifteen years is effectively forever as far as economic prediction goes.

In 1989 Francis Fukuyama wrote an essay called “The End of History”. It attracted a lot of attention, it was widely (and correctly) condemned as simplistic and wrong. None the less, I’m happy to brave the comparison, and suggest that we’re looking at the end of growth. “Growth” in the narrow, economic, “increase in GDP” sense that is.

Something between five and fifteen years of purely economic turmoil. During that time, as peak oil (and increasing consumption in China and India) kicks in, the price of oil / petrol is predicted to more than double, so that “Petrol pain to get so bad you’ll be forced to change your ways”. That will really put the brakes on. The price of oil affects the price of everything else, and as it rises so economic activity decreases. Looking further out, it will take decades to transition to non-fossil energy sources, by which time the challenges associated with rapid climate change should be really kicking in.

I’m not saying that there won’t be growth again, just that we may not, in the foreseeable future, experience such a time as the decade of sustained, significant growth that we experienced up to 2008. That isn’t bad news. It’s only bad news if we’re addicted to a profligate lifestyle of ever-increasing consumption, an unsustainable path which inevitably ends in a crash. We’ve got to give up that lifestyle anyway, and an end to growth is going to force us to do so. We’ve got to transition to a sustainable, “steady state” economy, and if we move to a more equitable distribution of wealth that can still mean improvements in “lifestyle” for the majority. We’ve got to redefine success based on new measures like the GPI (instead of GDP). And we’ve got to start the transition now.

For “Western” / OECD countries it’s time to start creating a world based on a different kind of growth.

26 comments on “The end of growth”

  1. Carol 1

    Why do they keep trying to cover up this? Some of us are already thinking that sustained long-term growth is a dead duck. Why do so many people want to keep their heads in the sand, as it is against all our long-term interests?

    • Dr Terry 1.1

      Carol, the trouble is that nobody appears to think at all any more about “long term interests”. All that matters is getting it right (surplus?) in the “short term” and leave the consequences for those to follow in the longer term (superannuation?). I am sure a particular person will have no future worries as he bathes in the Hawaiian sun!

      • Dr Terry 1.1.1

        Sorry, meant to add that I am somewhat “amused” (if that is the word) by the back down through saying “depression” lacked a capital “D”. This is how pathetic it becomes. Since when did “depression” require a capital “D” anyway, other than to begin a new sentence? Again, some idiot thinks he can take us for being bigger idiots than himself. But I guess he imagines he can get away with idiocy in the Tory created climate of the day.

    • Draco T Bastard 1.2

      Growth is the promise to the majority that things will keep getting better for them despite the fact that the rich are taking all the wealth.

      • True Freedom is Self-Governance 1.2.1

        Pretty much sums it up. And there are clearly still enough turkeys believing their brighter future is just around the corner as long as they keep working hard to grow the economy.

  2. vto 2

    Why do people want bigger houses with more things in them anyway?

    Why do people want flasher cars?

    I mean, it is all pretty shallow and boring.

    If we as a group became more enamoured with easier living it would free us up to do all the other things this planet offers. Bugger houses and cars – boring. Dunno about you fullas and fullesses but when I see a porsche driving down the road or a huge bright empty house on a hill it doesn’t fill me with desire or admiration, it sort of fills me with … how boring. Except when the porsche plants boot and leaves me in the dust – then there is a bit of boy racer excitement… so there we go, growth is all about boy racer excitement.

    But of course growth is what is needed to pay for the interest due under the existing fractional reserve banking system. That is the real reason the shrill cry for growth keeps ringing loud… without growth we cannot pay the interest bill. Fact.

    • SamHall 2.1

      “fullahs and fullesses” Thats a phrase we use in conversation. Have we met?
      That was a lengthy Uturn critique that was scribed the ova day. Angry? Frustrated? Resentment?

      Compassion Moderation Humility. These are the 3 Treasures.

      Reading the attitudes of Vicky32, we understand why some of the younger generation suggest giving the “boomers” “the needle”.

      So Sad, but ya reap wot ya sow.

      • vto 2.1.1

        Hi Sam, don’t know if we have met. Hopefully not as anonymity is important for me banging around here.

        As for Uturn, I am highly suspicious of that poster. There is something not right there.

      • Carol 2.1.2

        I’m all for compassion and humility. Moderation is good sometimes, but can just serve to reinforce the status quo at other times…

        … an yet, vicky32, is far from the boomer stereotype that some younger folk needle….. working class, unemployed, doesn’t own a house or car………..

        • vto 2.1.2.1

          pure moderation leads to mediocrity…. the amended version is thus …

          all things in moderation, including moderation.

          [lprent: That is what we prefer as well. Of course when moderation is required then we try to be quite immoderate to encourage people not to want us to moderate. In particular it discourages people from getting close to the verges because we won’t just remove their tentative toes, we’ll try for a leg removal on the basis that if they can’t walk to the verge then they’re less likely to waste our time. ]

    • Dr Terry 2.2

      Yes, “growth” in purely financial and grasping materialistic terms. These apologies for humanity do not or cannot recognise that there are other and more worthy values in life.

  3. Afewknowthetruth 3

    The banksters’ Ponzi scheme is totally dependent on perpetual economic growth [on a finite planet}.

    Therefore, the official narrative will remain the same: growth [at any cost]. And the lies will get bigger and bigger.

    Nothing will change as far as society goes (other than falling off the cliff at an ever faster rate) because, almost without exception, MPs are scientifically iliterate, financially illiterate and economically illiterate morons. That’s MPs of all parties.

    Even as I write, my district council has endorsed a totally dysfunctional ‘tourism brochure with a few funny numbers inserted’ as a plan for the next decade! And, needless to say, they are passing on the costs of all their continued incoompetence straight onto ratepayers. A doubling of rates over the next 6 or 7 years is forecast. But the community will be bankrupt before that happens, of course.

    Need;less to say, the time to deal with the dire energy predicament and the even more dire environmental predicament was more than decade ago, when I and others raised the matters as urgently requiriung attention. And, needless to say, we were told: “You’re too gloomy. That [economic collapse] will never happen.” In fact, even as the ship is sinking, we are still told: “You’re too gloomy, That will never happen.”

    • prism 3.1

      The Titanic was built to be unsinkable. So adequate precautionary measures weren’t considered.

  4. TimD 4

    A couple of a links if you want to put everything together:
    This is about peak oil, growth and consumerism, or energy, economy and the environment.

    http://www.chrismartenson.com/crashcourse

    or here – something that is proposed to be done about it all – a mechanical engineer’s perspective

  5. Peter 5

    Only one thing for it then, it’s time to dust off what remains of centralised planning capacity within the state sector, and prepare a greenprint for a steady state economy on these shaky isles.

  6. Draco T Bastard 6

    Southern Limits has an interesting blog post up:

    The global economy is based on transportation networks that are propped up by cheap energy. Because of this we can be relatively certain that when demand for energy begins to fall that the economy is slowing. And when energy prices fall sharply we can be relatively certain that the economy is not just slowing but entering into a recession.

    Everybody is probably aware of fuel prices dropping over the last week but this is happening during the beginning of the Northern summer – a time when oil prices usually rise due to the increased demand as people go on holiday.

    • Colonial Viper 6.1

      Worth reading.

      http://dailyresourcehunter.com/whats-with-oil-prices-byron-king-answers/

      As you can see from the chart, many producers lift oil at an overall cost of $10-20 per barrel. Even the major international players (the pink shading on the right) are in the $40 per barrel average for production.

      But take a look at that “budget break-even” line — the greenish shading. That’s the price at which a list of petro-players has to sell oil in order to fund their national spending. Keep in mind that all of the countries on the list — from Qatar to Venezuela — rely on oil sales for the vast majority of their national income.

      Specifically, Libya, Saudi Arabia, Algeria, Iraq, Angola, Nigeria, Ecuador, Iran, Russia and Venezuela all require oil prices of at least $80-100 (or more) just to have sufficient income to run their national budgets. Without a strong oil price, these countries will have bread lines and riots.

    • After reading Chris Nelder’s article last week here: http://www.smartplanet.com/blog/energy-futurist/the-future-of-oil-prices/508 I have a feeling that oil prices have almost bottomed out. This does not bode well for the economy however because as we can see here: http://www.odac-info.org/sites/default/files/refiners-acquistion-costs-n.png the maximum price that the U.S. economy can run on without beginning to cause massive problems is around $87 per barrel. Which according to Barclay’s is now also the operators budget assumption. In other words the tight rope oil companies have been walking in trying to maximise profits and minimise demand destruction has run out. They can’t afford to sell oil any cheaper and the world’s largest economy is now at the point where it is very close to not being able to afford the cheapest oil on the market.

    • Dr Terry 7.1

      joe90. A steady state by “disaster or design” is the critical question here. The writer takes a very idealistic view with regard to New Zealand. Watch for Utopian idealism. Nice to see optimism (of an evolutionary nature). The “disaster” could be that humankind enters “devolution” whereby persons become “technocrats” in a technological era.

  7. Bored 8

    A link for the benefit of any “growth” addict, TS, Gos etc, have a look at a non political mathematicians prognostics upon compound growth.

  8. captain hook 9

    growth will taper off slowly but slow down it will.
    what we have witnessed will be looked back on with awe from future generations.
    gross expenditure of energy and resources.
    they gonna have a tough job to create something new with what they get left with.
    but they will always remeber the 60’s for the music that people made themselves.
    bon voyage.
    beam us up scotty.

  9. Draco T Bastard 10

    And it looks like the surplus has been delayed – again.

    The Government’s plan to return to surplus by 2015 looks to have suffered a serious setback, with the Reserve Bank cutting growth forecasts for the year.

    The bank blames the slowing economies of New Zealand’s trading partners, and it has decided to hold the official cash rate (OCR) at 2.5 percent.

    And, of course, Shonkey is saying we’re still on course.

  10. Georgecom 11

    Fukuyama was wrong if you take The end of history to mean the final triumph of neo-liberal capitalism. 2008 and the stagnation since has shown that neo-liberal capitalism is having its own historical end.

    What will replace it, if we are smart and lucky, will be a more negotiated political economy, something more communal and social without necessarily getting rid of markets. Economies will be more localised and regionalised and less globalised. Focus will need to be made on equity and flexible sharing of jobs and resources. Income parity and income security will be more important.

  11. Richard Heinberg and Jeff Rubin both have books out now called The End of Growth. A review of both books here: http://www.energybulletin.net/stories/2012-06-11/end-growth%E2%80%A6-and-then-what-review-heinberg-and-rubin

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