Economists Forecast the End of Growth as We Know It -- It's About Time
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"Our global economy, reckless in its use of all resources and natural systems, shows many of the indicators of potential failure that brought down so many civilisations before ours."
Industrial civilisation is currently "completely dependent on the availability of cheap energy." Therefore, resource depletion combined with "the wild cards of rising temperatures, slowly rising sea levels, ocean acidification, and, above all, destabilised weather for farming" could lead to "a rolling collapse of much of civilisation" - unless the world embarks on a "Manhattan project level of commitment" to transition to an alternative energy and agricultural system.
Last year Grantham issued his stunning but little-known verdict that previous US GDP growth rates of 3% a year are now "gone forever." Future US growth will eventually approximate:
"1.4% a year, and adjusted growth about 0.9%... The bottom line for US real growth, according to our forecast, is 0.9% a year through 2030, decreasing to 0.4% from 2030 to 2050."
He adds that Prof Gordon and others have failed to account for the role of "tightening resource constraints" and "environmental costs that increase at an accelerating rate":
"Resource costs have been rising, conservatively, at 7% a year since 2000. If this is maintained in a world growing at under 4% and a developed world at under 1.5% it is easy to see how the squeeze will intensify."
Resources might eventually increase their costs at 9% a year, in which case "the US will reach a point where all of the growth generated by the economy is used up in simply obtaining enough resources to run the system." Within 11 years, under this scenario, "the economic system would be in reverse."
However, Grantham now highlights two trends that could facilitate the transition to a more stable economy - declining fertility rates and the rise of renewable energy. Garnering data over the last 40 years, he demonstrates a "remarkable drop in fertility" in the US, Europe, the richer East Asian countries including China, and even South Asia and Africa. According to the more optimistic end of UN projections, if such trends continue global population would peak at 8 million by 2050 before declining to near 6 billion by 2100 - a process which could be sped up with appropriate policy measures.
Simultaneously, Grantham argues we may be on the cusp of "a great technological leap that for the first time is accompanied by less energy use – the technologies of solar, wind power, and other alternatives as well as electric grid efficiencies and improved energy storage." By 2025 to 2030, he observes:
"Both solar and wind power are likely to be cheaper than coal... once the capital is found and the project is built, a wind or solar farm delivers far cheaper energy than a coal-fired utility plant, at around one-third of the marginal cost of coal."
He estimates that "nonrenewable energy" could be completely replaced by renewables "in 30 to 50 years", during which the new technologies will become increasingly cheap and efficient.
But Grantham still concurs that these developments cannot herald a return to the era of high growth, although they might smooth the way toward a new economy that is "less overreaching, less hubristic, a lot humbler about growth and our use of resources, and more determined to live in balance with the natural energy we receive from the sun and the heat, food, and water with which we can sustainably be provided."