‘Must it not then be acknowledged by an attentive examiner of the histories of mankind,’ Malthus wrote, ‘that in every age and in every State in which man has existed, or does now exist, that the increase of population is necessarily limited by the means of subsistence… and the actual population kept equal to the means of subsistence, by misery and vice.’
Malthus’s gloomy vision was out of step with the upbeat enlightenment values of 18th- and 19th-century Europe. And, as it turned out, he misjudged the impact of science and technology on food production. The introduction of mechanized farming, combined with the spread of oil-based fertilizers and pesticides, increased harvests beyond imagination. Malthus also failed to take into account the link between falling birth rates and improved living standards. As industrialized societies became wealthier and women gained some measure of economic independence, birth rates leveled off dramatically.
Around 2,000 years ago, with the Roman Empire and the Han dynasty in China at their peaks, there were 300 million humans spread around the globe. By the time Malthus was penning his population thesis 1,800 years later there were thought to be around a billion people on the planet. By 1950, a century and a half later, that number had increased to 2.5 billion. Then the exponential growth factor really began to kick in: by 2005, just 55 years later, there were 6.5 billion people, an increase of 160 per cent. The UN now says we’re on target to reach 9 billion by 2050.
But it’s by no means a sure thing. A lot depends on the variable that Malthus missed, what demographers call the ‘fertility rate’ or the number of children a woman will have during her lifetime. Already the fertility rate is below replacement level in more than 75 countries, which means that populations are falling in those nations before migration is taken into account. Why? Well, the answer is not straightforward but it appears there is a clear link between a falling fertility rate and women’s empowerment. The more economic power and the more education that women have, the more likely they are to choose to have fewer children. The UN projects future population numbers using low, medium and high fertility forecasts. With a low fertility rate (entirely feasible given current trends) the agency predicts a leveling off and then decline in world population. Numbers will peak in 2050 at 8 billion, then start to gradually decline so that by 2100 we will be back to where we were in 1998 with around 6 billion people.
But Malthus wasn’t the only growth skeptic. The classical economist and philosopher John Stuart Mill reckoned that a growing economy was necessary up to a point but that eventually a ‘stationary state’ would be needed to replace the ‘trampling, crushing, elbowing and treading on each other’s heels’ that characterized the rough-and-tumble nastiness of Dickensian Britain.
Mill was an economist but his interests ranged widely over philosophy and political economy. He was concerned with big issues and fundamental questions:
‘Towards what ultimate point is society tending by its industrial progress? When the progress ceases, in what condition are we to expect that it will leave mankind… It must always have been seen, more or less distinctly, by political economists, that the increase of wealth is not boundless: that at the end of what they term the progressive state lies the stationary state, that all progress in wealth is but a postponement of this, and that each step in advance is an approach to it.’9
Mill envisaged a post-capitalist world of co-operative enterprise where greed and avarice would fade and growth would be unnecessary. Once the problems of production were solved he imagined ‘a well-paid and affluent body of laborers… not only exempt from coarser toils, but with sufficient leisure, both physical and mental, from mechanical details, to cultivate freely the graces of life…’10
Mill was perhaps ahead of his time in predicting that endless economic growth was inevitably self-defeating. But others were to follow in his footsteps.
Soddy and Keynes
One of the most notable, but largely unsung, critics of the orthodox growth model was the British chemist-cum-economist Frederick Soddy. In the wake of World War One, Soddy was devastated by the role his fellow scientists had played in the senseless carnage. He decided to devote himself to political economy and brought his formidable scientific background to the task. (He had already won the 1921 Nobel Prize in chemistry for his work on radioactive decay.) Soddy began by looking at the laws of thermodynamics, which you may remember from your high-school physics classes.
The first law says that energy can neither be created nor destroyed; it can only be transformed from one form to another. For example, when gasoline is burned in your car’s engine you are converting the original solar energy captured millions of years ago into mechanical energy, plus heat and waste exhaust. The first law leads elegantly into the second law, sometimes known as the ‘entropy’ law. The second law says that every time energy is converted from one form to another we lose some of the initial energy in the form of dissipated heat. What that means is that all energy use flows from low entropy to high entropy. In other words, the world is in a long downhill slide. And the higher the entropy, the less likely we are able to use that form of energy in any useful way.
What Frederick Soddy did was to apply his knowledge of physics to the money economy. In his 1926 book, Wealth, Virtual Wealth and Debt: The Solution of the Economic Paradox, Soddy argued that money and debt were at the root of our economic problems because they were not subject to the entropy law. Real wealth, he said, is concrete: furniture, houses, computers, farm animals, footballs, etc. This wealth, he said, is mutable and subject to decay over time. In other words real wealth is also trapped in the downward spiral of entropy. But money and debt are ‘virtual wealth’, Soddy wrote, abstractions subject only to the laws of mathematics. Debt, in particular, he cautioned, was a claim on future wealth, which could grow out of all proportion to the rate at which real wealth is created. Rather than decay, debt is a human construct that can grow indefinitely at any rate we decide. It is this debt as virtual wealth, according to Soddy, that is the driving wheel of growth:
‘Debts are subject to the laws of mathematics rather than physics. Unlike wealth, which is subject to the laws of thermodynamics, debts do not rot with old age and are not consumed in the process of living. On the contrary, they grow at so much per cent per annum, by the well-known mathematical laws of simple and compound interest… It is this underlying confusion between wealth and debt which has made such a tragedy of the scientific era.’11
Soddy’s thoughts on entropy and the bio-physical limits to growth were ignored at the time. But one of his contemporaries, John Maynard Keynes, was much more influential. Like Mill, Keynes was an iconoclast, a brilliant economist with a restless intellect. In the midst of the Great Depression of the 1930s Keynes advocated that government take an active, interventionist role in both fiscal and monetary policy. Firm government regulation and an active fiscal policy could, he said, kick-start growth in times of economic malaise. He believed the impact of state spending would catalyze the economy, create jobs and stimulate consumption. And he was right. Keynesian economic policies slowly helped to lift the world out of depression and became the dominant tools used by Western governments to manage national economies until the era of Ronald Reagan and Margaret Thatcher in the late 1970s and early 1980s.
But Keynes was not an unthinking cheerleader of growth. He wrote at length about the ethical problems of capitalism and the ‘love of money’ which, he reckoned, was the driving force behind economic expansion for its own sake. An economy that places money at the center will have no cut-off point, he believed, because ‘abstract money will always seem more attractive than concrete goods’. According to his biographer Robert Skidelsky, Keynes suggested that there should be ‘moral limits’ to growth long before the ‘limits to growth’ concept was first popularized in the 1970s. Those limits, Keynes wrote, should be based on a proper understanding of ‘the ends of life and of the role of economic motives and economic growth in relation to those ends’.
According to Skidelsky: ‘Keynes never ceased to question the purposes of economic activity… his conclusion was that the pursuit of money… was justified only to the extent that it led to the “good life”.