Juliet Schor on the Two Types of Economic Growth
Discussion
Juliet Schor:
Juliet Schor on the Two Types of Economic Growth
"We need to unpack the idea of growth. This overused term lumps together two very different dynamics, only one of which is really expansion. Intensive growth means using a fixed set of resources with greater efficiency. This productivity growth is rightly understood as the cornerstone of economic progress. As we begin to produce more sustainably, it’ll be because we make technological and other changes that yield efficiencies in the use of natural capital. A shift to organic and local agriculture, passive solar homes, wind power, and other forms of renewable energy will result in genuine productivity increases. Other true efficiencies can be had through information technology and enhanced human capital. To the extent that this kind of growth occurs, it will indeed provide opportunity and real wealth.
But most of the time when people (and economists) use the word growth, they are also referring to the process of pulling in new factors of production, or what’s called extensive growth. It is so named because it extends the scope of the market, or capitalist, sector, as it replaces public, household, or other types of production. Gross national product and other measures of output and income conflate intensive and extensive growth. But the extensive type is not really growth. It’s a shift of resources from one economy to another, or the use of a nonrenewable asset. Drawdowns of capital from the natural world to the market economy (e.g., felling timber, mining, overfishing, and using fossil fuels) are one example. If enough extensive growth occurs, the economies from which those resources are drawn become depleted or, if the process goes far enough, devastated. Eventually, extensive growth starts to become less profitable because the assets being used up get scarcer. It can eventually lead to blowback, which is now happening with the climate system, oceans, and forests.
While the standard account of economic development stresses factors such as human ingenuity, education, and physical capital, that view is beginning to be challenged by environmental historians and social ecologists. Some historians now argue that much of the growth of the industrial period has been of this extensive type, made possible by tapping into fossil fuel sources. We’ve long been aware that the industrial revolution depended on coal. What we haven’t done is work through the implications of that for the post-carbon era. Bill McKibben has put the point powerfully: “Fossil fuels were a one-time gift that underwrote a one-time binge of growth.”
The point is also true for other natural resources. Beginning in the sixteenth century, Europe and Asia deforested in order to grow, and resource depletion has been ongoing since then. Over the last few decades, a significant fraction of market expansion has occurred through running down ecosystems. The first national study to assess the extent of the overstatement of growth was done for the 1970s and ’80s for Indonesia, and found that half its measured gross domestic product growth disappeared once timber, oil, and soil depletion was factored in. The situation is even starker in China, where torrid growth has created environmental and social havoc. Studies of environmental degradation have found that Chinese GDP was overstated by 8 to 13 percent in the 1990s, and suggest the figure may have grown to as much as 25 percent now. U.S. consumption, fueled by Chinese exports, has become reliant on these drawdowns from nature. A recent estimate of the value lost on a worldwide basis to deforestation alone puts it at $2 trillion to $5 trillion a year." (from the book, Plenitude: New Economics of True Wealth