Are economies that need growth unsustainable?

Question

The presently dominant economic system appears to require exponential economic growth. I may be wrong, but whether or not it is is a question that is off-topic here — for the sake of this question, suppose that our economy needs growth and that a steady-state economy wouldn't work. Research has shown that economic growth and an increase in standard of living are tightly linked to an increase in energy use (see e.g. Physics World). Given the fact that energy sources are finite¹, does this mean that economic models that rely on growth are unsustainable?

See also: Is interest sustainable?

¹Of course, there is still plenty of room for growth, as vast amounts of renewable resources go unused.

Answer 1

During centuries, energy/resource consumption gradually grew. This is not a problem per se if new ways to acquire and exploit new resources are invented. But what is dangerous is

a) too fast growth of consumption

b) lack of reserves

c) lack of flexibility

In history, there were good times, when consumption grew, and bad times, when cultures unable to change their habits collapsed. Some civilisations, like ancient Egypt or China, were able to recover from the hard times easier than others, who didn't survive crises so well or even at all. Why?

This seems to be closely connected with the basic orientation of the culture. For example in ancient Egypt, the biggest goal was to "live forever" - their growth aimed to produce tomb treasures, which could be looted and reused in bad times. There are theories that people could legally loot their ancestors' tombs if the ancestors didn't bless them and protect them - the dead (and especially dead kings) were believed to have power to ensure blessing of good crops and of freedom from enemies. Whether these theories are true or not is a question for History.SE, the conclusion is that such civilisation was oriented for long term survival, not for temporary growth and that it survived thousands of years, at least three big crises and many smaller ones.

On the other hand, there were many cultures even more oriented for growth than our civilisation - they were mostly war-like states, like most of Dark Age kingdoms. Constant war, winning, loot and new vassals were requirements of their existence, so few such states survived, and many ceased to exist in few years, with just few major defeats. The culture survived the end of such states, but it couldn't stay long in with such orientation on military expansion.

Our civilisation is more similar to the Dark Age than to ancient Egypt, but of course better - it's oriented on economic and technological growth, which are more resistant to temporary failures than military expansion. But not so much - recent economic crisis shows it's drawback. And there are ecological challenges, oil peak and so on. Existence of this forum shows that there are people who try to make the civilisation sustainable, but the idea that we don't need reserves, because technological growth will solve everything decreases flexibility of our civilisation. How shall we survive the moment of opening eyes and seeing that oil is too rare to be cheap, and that other sources are too expensive for our potlatch?

So, economic growth can be sustainable, but

a) must be slower

b) must be backed up by better reserves for bad times

c) must not be a basic aim of the civilisation, since orientation to growth is in conflict with flexibility and willingness to decrease my consumption for the good of the whole. This is a matter of values - if most people are egoists who would rather accept risk of collapse of civilisation later than to decrease standard of living now, than growth is not sustainable and will eventually lead to disaster, but with certain minimal percentage of altruists willing to decrease their ecological footprint, even groth can be sustainable. That's why I'm here.

Answer 2

Economies that need growth to survive would be unsustainable when they will survive long enough. The resources are limited, and the growth means that resource usage is growing to infinity in infinite time.

However, after reaching some critical mass such economy must either collapse or become non-growth economy. The Roman Empire have started to fall when it wasn't able to conquer more territory. The Mayan Empire have fallen because of land depletion. But social systems can't be changed rapidly, so when such economy depletes all resources, its fall is rapid and brutal.

On our technological level, resource depletion would have tragic consequences for both the whole mankind and the nature. To prevent it, we must either find more and more new resources (beyond Earth) or limit its usage. When the usage of resources is kept on constant level, under contemporary criteria it wouldn't be considered growth. However, if we measure growth for example in cultural or intelectual criteria, the growth is still possible, but it won't be material growth anymore.

Answer 3

The question's fundamental premise, that our economy needs growth and that a steady-state economy wouldn't work, is a fallacy.

It's also a fallacy to assume that ongoing economic growth requires depletion of finite resources.

It's also true, incidentally, that we don't have any good measures of economic growth. The lazy proxy is usually taken to be GDP, but increase in real GDP is not the same thing as economic growth. You might have come across the broken window fallacy, which illustrates the point rather well.

Answer 4

It is a basic truth that the resources are finite and so growth is unsustainable in the long-run. An economy that requires growth must therefore be long-term unsustainable in its current form. That doesn't mean it can't turn into a different, more sustainable economy.

I think the question (and my answer in the paragraph above) presupposes an erroneous viewpoint though. The fact is that cultures, languages, and economies are constantly changing. Because an economy is always changing we have to be careful regarding definitions of sustainable. Typically the current vector will not be sustainable but that doesn't mean that the system won't gradually evolve in the direction of sustainability. The question is what is required to get there?

As Prof. Joseph Tainter points out in his books and lectures, very often times, immediate sustainability sacrifices long-term sustainability because it requires additional complexity and consumption. He points to Rome as an example. They would have fallen earlier were it not for all the things they did which contributed to a rapid collapse later. It is an open question whether American and European economies are past that point.

Answer 5

As [user141] alludes to, books have been written about this subject. From Wikipedia's Summary of EF Schumacher's Small is Beautiful

In the first chapter, "The Problem of Production", Schumacher argues that the modern economy is unsustainable. Natural resources (like fossil fuels), are treated as expendable income, when in fact they should be treated as capital, since they are not renewable, and thus subject to eventual depletion. He further argues that nature's resistance to pollution is limited as well. He concludes that government effort must be concentrated on sustainable development, because relatively minor improvements, for example, technology transfer to Third World countries, will not solve the underlying problem of an unsustainable economy [. . . ]

He faults conventional economic thinking for failing to consider the most appropriate scale for an activity, blasts notions that "growth is good," and that "bigger is better," and questions the appropriateness of using mass production in developing countries, promoting instead "production by the masses." Schumacher was one of the first economists to question the appropriateness of using gross national product to measure human well-being, emphasizing that "the aim ought to be to obtain the maximum amount of well being with the minimum amount of consumption."

As noted in the above article, it's also interesting to note that EF Schumacher was academically linked to John Kenneth Galbraith, who posited the proposal in American Capitalism that an economy can exist in a steady state equilibrium (as EnergyNumbers alludes to).

The question of whether or not interest is sustainable is covered pretty well in Joseph Schumpeter's Capitalism, Socialism, and Democracy (short answer- according to him- "no").

The book that most directly answers your question is possibly the most contentious and least academic of the books listed here: Clyde Prestowitz's The Betrayal of American Prosperity, however it should be noted that the author is heavily credentialed and the book is rated a full 5 stars (from 20 reviewers) on Amazon.com.