by : Rex Nutting
(MarketWatch) — Those of us who believe that the economy should serve us instead of the other way around are conflicted.
We know that the only way to end unemployment at home and poverty around the world is to make the economy grow faster. But we also know that nothing can grow forever, that the faster the global economy grows, the sooner we’ll run out of essential resources, including fossil fuels, water, arable land, healthy ecosystems and moderate climate.
Economists and politicians can’t admit it, but the laws of physics apply, no matter what the latest polls tell us. The Earth has finite resources that will someday limit our economic growth.
The Earth cannot forever support 7 billion people consuming as much as Americans consume. And yet we’ve staked our future — individually, nationally, and maybe even as a species — on that impossible dream.
Some people are in denial. They believe that the Earth’s resources are limitless and that a bean stalk can grow to the sky. Or perhaps they know deep in their heart that we are on the road to an environmental and economic catastrophe, one that they think they alone will survive through wits, gold, and guns.
Others believe fervently that technology will bail us out yet again, that clever primates will always find a new tool that will help us extract ever more stuff from the planet. They laugh at the warnings of the Rev. Thomas Robert Malthus, who warned in the 19th century that the population would inevitably outgrow the food supply, leading to periodic mass death due to wars, famines and plagues.
Malthus was wrong, of course...so far. Improvements in agriculture, finance, government, manufacturing and transportation kept pace with the population growth. Even with the population about seven times greater than in Malthus’s time, the percentage of the human race that is truly poverty stricken has fallen. On average, we live longer and better lives than our ancestors did. More people have enough to eat, clean water to drink, a secure shelter and basic health care.
Precarious poor
But the position of those poor billions in Asia, Africa, Latin America and even in America is precarious. The global recession hurt the poor and the nearly poor the hardest, showing in high relief just how dependent they are on our high-living ways.
The only working model of growth the developing world knows is to export more stuff to the rich countries. It turns out that the best way we’ve found to reduce poverty in Asia is for the rich in North America and Europe to consume more.
It’s the ultimate trickle-down economics. It takes ever-increasing consumption by those of us in the developed world to keep the hands of the developing world busy and their bellies full. We’ve outsourced the production, but not the consumption, except for a few crumbs.
But because we’ve outsourced the productive jobs, many of us in the developed world can’t afford to increase our consumption. The answer? More debt to pay for more stuff to keep the economy growing.
Debt is merely a claim on tomorrow’s real wealth — actual productive assets and actual goods and services. Unfortunately, paper wealth (debt) has grown faster than real wealth, which is constrained by those silly laws of physics. I wonder what Malthus would say about that?
Money can’t buy me love
Everyone knows money can’t buy happiness, but we run our economy as if it does. Although it is plainly true that we do need to eat to survive, our well-being cannot be accurately measured by the sum of what we produce and consume.
A few economists have rejected the premise that the economy must grow forever. In Britain, the New Economics Foundation has created a Happy Planet Index as an alternative to the traditional measures of economic progress that focus on only growth, not on well-being or sustainability.
According to the Happy Planet Index, people who live in the richest countries aren’t any happier than those who consume less of our dwindling resources. A certain level of economic development is essential to our well-being, but our quality of life is also determined by how free we are politically, how equal we are socially, and by the opportunities we have to be creative or to live in a loving community. Read more about the New Economics Foundation.
This might shock you, but it’s possible to live a long, healthy, happy life without taking more than your share of the world’s limited resources.
Whether we like it or not, we in the rich countries are going to have to live less extravagantly in the near future.
We can downsize the right way, or the wrong way. The right way is to voluntarily rearrange our priorities so we don’t consume more than the Earth can produce, but to do that some of us will have to sacrifice and we’ll all have to share the only planet we’ll ever have. We’ll have to consume to live, not live to consume.
The wrong way is Malthus’s way: War, famine and plague.
Neither way will be easy. Nothing is more important.
Rex Nutting is Washington bureau chief of MarketWatch.
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