The End of Growth: Adapting to Our New Economic Reality [Paperback]

The End of Growth brings together the crises of Peak Oil, the climate and the financial crash to give a view of a world that cannot go on living beyond its limits. It should be required reading for every politician who talks about a return to 'steady growth'. The good news is that there are lots of things we can do to prepare for a radically different future. Start by reading this excellent book!

I sent off for an advance copy of End of Growth: Adapting to Our New Economics Reality a few weeks ago. Having heard Richard Heinberg give a talk a while back, and receiving his regular Museletters, my expectations were high. I was not disappointed. The man has an incredible gift for making complexity appear simple, and for delivering unpalatable facts with gentle irony. The historical development of the modern economy is laid bare, our current predicament is there for all to see, and the only rational solution is given a thorough airing. Buy it for your friends, buy it for business people large and small. It is an essential primer for building the future.

This is a very economically authoritative book which convincingly argues a profound environmentalist, paradigm changing point. The author is a key member of the 'Post Carbon Institute' and in this book he explains why the fundamental economic truth of our time is that we are travelling beyond the period where cheap carbon based fossil fuels can foster perpetual economic growth. The arguments in this book could also be perceived as opening up a third side in the government debt verses austerity debate. Keynesian economists, such as Paul Krugman, may have to recognise that they now have to engage on two fronts, with the unlikely pairing of right wing conservatives, and now these green type groups, both pitted against them. Although in agreement with many of the anti free markets views of Krugman and others regarding the causes of the recession, Heinberg characterises government stimulus as "The Bridge to Nowhere", in that energy and non renewable resource scarcity will prevent a return to long term economic growth.

"The Keynesians still see the world through the lens of the Great Depression. During the 1930s, industrialised countries were in the early stages of their shift from an agrarian, coal-based, rural economy to an electrified, oil-based, urban economy--a shift that required enormous infrastructure investments (in new highways, airports, dams, and power lines) that would ultimately pay off handsomely for a nation on the verge of realising a consumer utopia. All that was needed to initiate the building of that infrastructure was credit--grease for the wheels of commerce. Government got those wheels rolling by taking on debt, with private companies increasingly taking the lead after World War II. The expansion that occurred from the 1950s through 2000, as that infrastructure was built and put to use, easily justified the government pump-priming that initiated the process. Future payments of interest on the government debt could be ensured through growth of the tax base. Now its different. . . . both the U.S. and the world has a whole have passed a fundamental crossroads characterised by increasing scarcity of energy and minerals. Because of this, strategies of growth that worked reliably in the mid-to-late 20th century-via various forms of business and technological development-have reached a point of diminishing returns. Thus the Keynesian spending bridge today leads nowhere. . . . the Keynesian remedy does not cure the ailment but merely extends the suffering (while increasing government debt to truly toxic levels) . . . There is no "silver bullet," no magic solution that will turn back the clock to an era of abundant resources and easy growth. For now, all that governments can do is buy time through further deficit spending- ideally, using that time to build infrastructure that will continue to function in the coming era of reduced flows of energy and resources." p100-102

The early parts of the book present a background critique of how mainstream economics has omitted to value natures finite capital and non renewable resources. Then Heinberg is obliged to detail the well documented flaws and extravagances which led up to the credit crunch / recession. He seems to recognise that many of these ideas, though essential to his narrative, are already familiar to us, and therefore trots through them nimbly, while of course placing extra emphasis on energy and resource issues. One quality of this book, which adds to its already authoritative feel, is that many good data sources and graphs of the sub-prime crisis / debt / government stimulus are provided.

The mid part presents the data and discusses the trends regarding the core issues of finite cheap energy and non-renewable resources. Then the various contemporary arguments which down play these constraining factors are dealt with. Some frightening statistics regarding China's growing energy and resource consumption are presented, which although not proving that net world economic growth is ending, do illustrate that economic growth for the rest of us will probably get harder.

One small gripe I have is that in a section titled "Currency Wars", Heinberg includes a citation which points out: " It's inconsistent for the Americans to accuse the Chinese of manipulating exchange rates and then to artificially depress the dollar exchange rate by printing money" p207. But surely it is a question of degree? The final conclusion as to who is the biggest offender must hinge on whose currency is actually the most under-valued, and China still easily comes top on this measure.

The latter part of the book is more recognisably a 'green' read. There is a comprehensive list of stances and suggestions which include many that most would regard as sensible, and a few that some would regard as perhaps idealistic or ineffectual.

Although Heinberg arguably could be over egging the present effects of energy and resource shortages, the questions of environmental depletion and non-renewable resources in the long term easily trump all other considerations, especially in view of developing countries like China being able to consume more and more due to their manufacturing and exporting prowess. Therefore it is hard not to strongly agree with the central thesis of this book.

But if elites in the West are going to abort a Keynesian style return to consumer led growth as the author seems to wish, and instead settle for an austere non-growth economy, I believe they have to offer the low income working population / unemployed more than a chance to grow their own food, join co-ops, and do odd jobs in return for local currency as a consolation prize! This is an incomplete caricature of the suggestions Heinberg puts forward, but it does illustrate a point. As we are now all too aware, austerity does not fall evenly upon the population, and a weakness of this green approach to the future is that in their ideas there is some, but not enough, consolation for the less skilled working person, who is and will bear the brunt of austerity.

This is why I believe a certain kind of protectionism will inevitably make its way into rich country politics in the near future, to square this circle and tighten lower end labour markets within non-growing rich countries. (Although to be fair Heinberg does mention tariffs in a limited context "The adoption of a system of tariffs that would allow countries that implement sustainable policies to remain competitive in the global market place with countries that don't" p252). It should not be technologically ambitious protectionism which provokes resentment from other countries, and it should consider carefully questions of maintaining industry competition in relation to factors of scale and scope.