Wednesday, January 23, 2013

Infinite Growth in a World of Finite Resources?

Perpetual Growth is the basic theory employed by all business economists in banks, corporations, academia and at the Federal Reserve. But an infinite growth model cannot be supported by a world of finite resources.

Economic growth is often associated with the accumulation of human and physical capital, as well as the technological innovations that increase productivity. Yet, in the absence of natural resources, there can be no economic growth. Even a limit on resource availability will eventually limit economic growth.

Petroleum and fresh water are perhaps the two most critical resources, and the world is now grappling with the limited availability of both.

For example, in 1964, nearly 500 billion barrels of oil were discovered. By 2011, it had fallen to below 100 billion barrels.

In 1965, the world produced 32 million barrels of oil per day. By 1980, that number had almost doubled to 62 million barrels. However, since 2005, oil production has plateaued at roughly 75 million barrels per day. In that time, total supplies have fluctuated within a narrow 5 percent band.

Early in the 20th century, much of the world's oil was untapped. At that time, prospectors merely had to drill a few yards into the ground and install inexpensive rigs to extract oil at rapid rates.

However, at the beginning of the 21st century, in order to achieve the same flowrates or less, oilfields must be drilled much deeper and managed with sophisticated techniques and equipment costing many hundreds of millions of dollars.

Most critically, Dr. Chris Martenson notes the following:

"In the past 22 years, half of all of the oil ever burned has been burned. Such is the nature of exponentially increasing demand. And the oil burned in the last 22 years was the easy and cheap stuff discovered 30 to 40 years ago."

The world's supply of clean, fresh water is also steadily decreasing. Ninety-seven percent of the water on the Earth is salt water; only three percent is fresh water. Moreover, slightly over two thirds of that is frozen in glaciers and the polar ice caps.

Water demand already exceeds supply in many parts of the world, and as the world population continues to rise so does the demand for fresh water.

Water is obviously the key component for human life. It is also vital to energy, industry, agriculture and livestock. Decreasing water supplies will lead to higher food prices and perhaps even food shortages.

The world is also experiencing a peak in other key resources, such as rare-earth metals. The period of cheap and easy extraction is giving way to complex and expensive extraction.

Average ore grades are in decline for most minerals, even as production is increasing. Easily processed ores are becoming exhausted. Mines are becoming deeper, more remote and more inaccessible. This requires higher inputs of capital and energy for both extraction and processing. Lower quality resources are more expensive to extract, and they eventually become uneconomic when the ore quality is too low.

For example, lithium, which powers the batteries in cell phones, laptops and electric cars, is difficult to find and excavate. The car manufacturer Mitsubishi has predicted a worldwide supply crisis by 2015 if new reserves are not discovered. A lithium shortage would affect the price of laptop computers, as well as cause a slowdown in the production of hybrid electric cars, increasing our dependence on oil.

As the world's population has steadily increased — now eclipsing 7 billion — so has demand for many of the essentials that make our world run so smoothly. The ability to exploit finite resources has provided much of the world with a better standard of living than at any other time in human history. But many of those essentials are finite and non-renewable.

There is a false perception among much of the public that technology can substitute for finite and non-renewable resources. However, while technology can lead to greater efficiencies, it requires energy — it does not create it.

The global population is on track to reach 9 - 10 billion people by 2050. The following should provide some perspective on what that means:

At present, the global population is increasing by 83 million people annually. In other words, each year the world is adding the equivalent of Egypt.

This rapidly growing population will require abundant energy and food. Can that be accommodated? Not likely. Across the board, the rate of resource depletion is accelerating.

According to the Global Footprint Network group of scientists and economists, the current population of seven billion is already consuming natural resources as if we have “1.5 Earths."

According to scientists, 43 percent of Earth's surface has already been cleared for urban development or agriculture. By 2025, the usage level is expected to exceed 50 percent, when the population reaches eight billion.

Our current levels of consumption will have devastating consequences to the forests that provide clean air and to the water resources that all life depends on.

In 1960 there were 1.1 acres of arable farmland per capita globally, according to data from the United Nations. By 2000 that had fallen to 0.6 acre. Yet, during that time, the global population doubled from 3 billion to more than 6 billion.

In other words, productive farm land and the human population are moving in the opposite directions.

Naturally, the developing nations — which hold 80 percent of the world's population — are demanding improved lifestyles.

However, if every person used as many resources as the average North American, more than four Earths would be required to sustain the total rate of consumption, depletion and waste assimilation, according to an environmental "accounting system" developed by researchers William Rees and Mathis Wackernagel.

A recent WorldWatch Institute report put it this way: “If everyone lived like the average American, the Earth could sustain only 1.7 billion people — a quarter of today’s population.”

WorldWatch anticipates “a future scenario not only incompatible with perpetual economic growth but likely to lead to economic and societal decline,” mass starvation, wars and pandemics.

The Pentagon agrees, predicting eventual mega-droughts, famine and widespread rioting erupting across the world.

As it stands, nearly half the world's population — more than 3 billion people — lives on roughly $2 per day. According to the World Food Programme, in some of the poorest countries households spend as much as 60-80 percent of their income on food.

Conversely, food spending in developed countries is quite low. People in most European countries spend over 10 percent of their incomes on food. Americans spend just 6 percent on food, less than people in any other country in the world.

An additional two billion humans competing for limited resources will trigger commodity shortages that will prove disastrous. The world will be confronting shortages of hydrocarbons, metals, water and fertilizer, which will dramatically affect global agriculture. The latter is critical.

Hidden in every calorie of food you eat are 10 calories of fossil fuels. Modern agriculture and food delivery is highly inefficient. In fact, this system is the first in history that consumes more energy than it delivers.

In the absence of abundant water resources, cheap hydrocarbons and the fertilizers derived from petroleum, that system will collapse.

If population growth rates remain as they were between 2005 and 2010, 27 billion people will inhabit the planet by the end of the century, says Anthony Barnosky from the University of California at Berkeley. That would lead to the disappearance of most large and small animals, and the collapse of food chains.

Historically, economic growth was predicated on population growth, as well as cheap and plentiful energy supplies. But it is now clear that, going forward, population growth will be a limiting factor to economic growth. Additionally, cheap and plentiful energy supplies — once take for granted — are a thing of the past.

With all of this in mind, it's time to abandon the perpetual growth economic model and move instead to a model that stresses conservation, efficiency, recycling and renewability. Clearly, the world is on an unsustainable path and, by definition, anything that is unsustainable won't last.

Above all else, we must redefine quality of life as something other than just having "more." The goal should be to simply have enough. Our quality of life should not be measured by "stuff," but instead by the things that make life rich; our relationships, our hobbies, our work and our passions.

No comments:

Post a Comment