Chapter 3 of The Crash Course
TOPIC: Exponential Growth
URL and LINK: See Web Links
Fortunately, there are some relatable ways to understand how critical exponential growth is to our economy—one very good one is presented in the chapter on Exponential Growth within our online video series, The Crash Course. If you haven’t yet seen it, it’s worth taking a few minutes to watch it now, if you’re able to (it’s only six minutes in length). It really makes the concept easy to grasp.
Another good one is the Rule of 72, which works like this:
Suppose we said that we wanted our economy to grow by 5% per year. The Rule of 72 allows us to quickly answer the question: How long will it be before our economy has fully doubled in size?
To answer that question all we have to do is divide the rate of growth into 72. While 5% doesn’t sound like very much growth, the Rule of 72 tells us that in just 14.4 years (= 72/5) an economy growing at 5% per year will be twice as large.
As in “fully doubled” in just 14.4 years!
Everything will be twice as big: twice as much economic activity, twice as many cars sold, twice as much food grown and eaten, twice as many airline miles travelled and trips taken—everything will be two times bigger.
Imagine you live in a small city that is growing by this modest 5% per year and you have a child. Before that child’s 15th birthday, your small city now has twice as much of everything. By the time that child has almost reached her 29th birthday, the city in which she was born will now be 4 times as large because it has gone through two doublings. If the growth persists, by the time your child is 58 years old, her small city will be 16 times as large as when she was born. More frighteningly, just 14.4 years after that, at the ripe old age of 72, the city will now be 32 times as large. 32 times!
If that same economy were to grow at 7.2%, the current reported rate of China’s GDP growth, then that economy would double every 10 years.
Do you see the predicament here yet? If every economy in the world is growing exponentially, and they are all doubling away every decade or two, eventually they’ll run out of resources and room. That’s just common sense, right?
The world is already mired in low growth and saddled with some $200 trillion of debt, up a whopping $57 trillion just since 2007. Sadly, the world didn’t take on all that new debt because of clear-eyed confidence in the future, but because worried politicians borrowed it from scared central bankers, both of whom merely wanted to the keep the whole system from imploding.
The core of the problem, never publicly recognized by either the politicians or central planners, is that our system of money and our banking and financial systems are all hopelessly addicted to exponentially growing piles of debt and money. As long as they are growing exponentially, everything is stable, but the minute they stagnate or shrink(!), as happened in 2009 after the real estate bust, the financial and banking systems threaten to collapse.
Does having monetary and financial systems whose very stability are built around the idea of perpetual exponential expansion sound particularly robust or intelligent? If it doesn’t, then you are on the same wavelength as your authors.
WATCH:
Chapters 6 - 18 of The Crash Course
TOPIC: The Risks to our Economy
URL and LINK: See Web Links
Okay, we’ve got just one more topic to cover before we can assemble this all into a coherent call to action.
ENVIRONMENT
Even at today’s level of world economic output, there are already hundreds of flashing warning signs saying that we’re taking too much from the natural world and putting too much waste back in to it.
The “plan” of every single one of the world’s leaders is to double the rate of economic output of their country, and then double it again. Forever. But as we can all deduce, it’s not possible to endlessly double the size of something contained within a fixed space.
The world is very big, but it is not infinite. This is the reality that the generations alive today have to confront. However difficult it proves, either practically or emotionally, we are the first ones in history who are going to slam into the Earth’s limits to growth.
It’s not going to be possible to double the rate at which oil currently comes out of the ground. And even if it were, climate scientists tell us that would be a terrible idea. Certainly ocean fish stocks are not going to double anytime soon; they’re in full-blown collapse as it is. Nor are we going to double the water taken from depleted aquifers, or the food from rapidly-depleting soils. We may be able to eek out a little bit more from these stressed systems for a few more years but that bought time will come with a terrible cost.
Wedged between an energy system that cannot possibly expand forever, and an economic model that demands endless expansion, we have clear, ominous, troubling evidence—mountains of it!—that humans are impacting the natural world in destructive ways that will result in disruptive changes and ecosystem collapse.
Biological diversity is the very foundation of the natural world. In times past a human could live an entire life lasting 80 years and, on average, experience one species extinction during their lifetime. Now we are losing, on average, several species per day by some estimates (or several hundred per day, by others).
More than half of the world’s major aquifers are now in a state of dangerous depletion, and the millions to billions of people who depend upon them have no alternative supplies to draw upon.
Fertile soils are being degraded and eroded such that we can calculate when they will be entirely gone. Under current farming practices we may have as few as 60 to 100 harvests left. No soil means no food means no humans.
The oceans are acidifying at the fastest pace in 300 million years. We know that the largest mass extinction in Earth’s history, the Permian extinction, the one that erased more than 90% of all life forms in the oceans and on land, happened because the oceans acidified too much and too fast.
Climate change is now a matter of scientific record. The only questions left are how extreme it will be and how much damage we will experience. The glaciers in Antarctica are calving off at an accelerating pace, and their hundreds of gigatons of inertia will carry them into the sea, raising ocean levels, no matter what we do.
In response to these existential threats, most of the responsible nations are doing little more than making soothing noises publicly, while continuing with ‘business as usual’ in the background. Talk is cheap, but real solutions will be among the most expensive and radical tasks ever undertaken in human history. Our entire food and energy production systems will have to be re-engineered.