Like it or not, the modern world depends on economic growth. Every year, we rely on companies to churn out an ever-increasingly quantity of goods and services to satisfy consumer demand and to keep things humming along pleasantly. When economic growth is low or negative, there can be disastrous consequences.
Economists have known for a long time that there needs to be a certain level of underlying growth in the economy to keep unemployment down. Empirically, you don’t get low unemployment with low long-term growth. You need growth to provide the impetus for firms to make use of all of the available labor. Some companies will cut back if the future doesn’t look bright.
You also need economic growth from a political perspective. Every year, politicians offer the public more and more. If there’s a reduction in the growth rate, budget deficits explode, and the risk of a currency crisis rises.
Is Infinite Economic Growth Possible?
Recently, however, the notion that growth can continue forever is being challenged on environmental grounds. The carrying capacity of the Earth, the naysayers claim, means that the idea that we can have infinite growth on a finite planet is folly. Resources are limited, so growth must be too.
You’ll see this view cropping up regularly in media outlets that are skeptical of capitalism, or outright opposed to it. Capitalism – the constant search for profits – comes at the expense of the environment. Ultimately, the capitalist project will end because of environmental constraints.
The reason for this skepticism comes primarily from the way that industrialists operated in the past. Historically, miners would move into an area, harvest all the resources, and then move on without doing anything to return the environment to its natural state. Their activities were purely extractive.
But today, the situation is different. Companies recognize that if they want to secure their long-term profitability, they have to protect the natural world. Profits are only possible on a healthy, functional planet.
What’s more, we see a shift away from physical products to services: something that you can deliver with practically no resource costs whatsoever.
Take education, for instance. In the past, education required books, teachers, schools, and lots of expensive equipment. It wasn’t the most resource-intensive industry on the planet, but it required a lot of “stuff” to make it happen. Today, though, you can imagine a person getting an education without any physical resources at all, except, perhaps, their electronic devices and the energy required to power them. Lessons delivered through platforms like Khan Academy, provide high-quality tuition across a range of subjects, all for free, with plenty of support and resources to back up lesson plans.
The exciting thing about a resource like Khan Academy is that it delivers a service at zero marginal cost. The education of one child through the website does not affect that of another. You would need thousands of teachers to deliver lessons to a million children, but with online courses, you don’t need any.
You can see the point here. GDP data analysts have always included services in the calculation of GDP statistics. Online education platforms can deliver infinite lessons and practically no cost per lesson. So the total services in the economy have gone up dramatically.
Sustainable Economic Growth
Sustainable economic growth involving tangible goods is also a priority. Take a look at Cedar Hill EDC for instance. The area is one of the hottest development locations in the United States, thanks to the plethora of business-friendly regulations and close proximity to Dallas. But the main draw is the stunning natural environment. Businesses want to locate in beautiful settings because that also makes it worth their while being there.
The idea that companies want to ransack the natural world and move on is a story which has stayed with us, thanks to those opposed to economic freedom. But the truth is that the wealthier a country becomes, the more it wants to protect the environment it occupies. It becomes more of a priority as the economy fulfills all a person’s basic needs.
Growing companies also create products and technologies which help to protect the environment. We’re likely to see more biodegradable plastics, for example, going forward.
Economic Growth Can Reduce Our Dependence On Natural Resources
Currently, agriculture is one of the most resource-intensive industries on the planet and has a massive effect on the natural world. Mono-cropping is not good for wildlife. It reduces biodiversity and wipes out ecosystems. Farming also takes up a vast amount of space, reducing the area for wildlife to thrive.
Imagine a world, however, in which you could get all of the benefits of farm production with a fraction of the inputs. Well, it turns out that you can: we’re right on the cusp of the technology now.
Lab-grown meat uses 99 percent less land, 96 percent less water, and about half of the energy of traditionally-reared meat. It’s the same product, but it has the possibility of using dramatically fewer resources. Technology, in this instance, has found a way to use various inputs to create something that everyone wants – meat – at a lower resource cost. You barely need any resources to grow meat in a lab, but you need loads when you try to do it naturally on the back of a cow.
Concluding Remarks
Arguably, even if humans never leave planet Earth, economic growth will be infinite. The economy will continue to churn out more and more services (many for free) all to the benefit of humankind.
More likely is that humanity will leave the Earth and colonize the solar system over the next two centuries, opening up vast mining opportunities. Resource extraction could vastly accelerate from its current rate, and the solar system would be able to support the needs of all of us comfortably.
We can’t keep using more and more finite resources: that’s true. But it’s not correct to assume that the output of the economy is limited: it’s not. You can always increase the number of services.
