There Is No Wealth But Life
Talk to nearly anyone about the decline of growth in the the last 50 years and you'll likely get two responses. The first is denial that growth is slowing, as Marc Andreessen and Eric Schmidt express in debates. Once people get over their reflexive denial, they often fall back to the argument that growth must naturally slow. For the sort of people who are likely to grapple with these issues, namely public intellectuals, economists, business leaders and politicians, the decline in growth can be embarrassing to admit. Following that admission, one common riposte is to decry the expectation of continued growth. "It was an aberration. It won't be possible. It is unnatural!" they say, locating conclusions in the past, future and present. Last week we dealt with the idea that the low-hanging fruits of innovation had been picked in the past. This week we will turn to the future and the present arguments.
The first of these explanations for slowing growth is the demographic argument. This argument is most often made by demographers, public intellectuals and economists, not laypeople. Institutions from NGOs to think tanks and even banks have made this point. It is a clever and insidious argument that relies on indisputable demographic trends and the historical coincidence of industrialization and demographic transition. It's a convincing explanation because demographic trends are strong predictors, and the relationship between economic and population growth is well studied. While countering much of the substance of the argument is challenging, the shape of the argument is flawed. Remembering our narrative framework, we must acknowledge that the causes of human action are difficult to suss out. Are demographics responsible for economic growth or does growth shape our demographics? Emphasizing well-known and highly predictable demographic trends is a slight of hand that replaces a dramatic interpretation of conflict between man and nature with a tragic one.
This soft fatalism characterized by the inevitability of manmade trends is prologue to a second, more powerful and more pessimistic argument, that the scarcity of nature cannot allow continued growth. Rather than a forward-looking warning, that admonishes us to correct our multiplicative ways, this argument paints a dire picture of a Hobbesian state of nature punishing us for our growth. This line of reasoning is a favorite of conservationists and academics, but also feels intuitively correct to many who are just accepting the proposition of slow growth for the first time.
The Power of Population
"Demography is destiny," is often misattributed to Auguste Comte, the French philosopher who created Positivism. In fact, the phrase was most likely coined by Richard Scammon, American author and director of the U.S. Census. This mix-up is relevant to our discussion because Comte and Scammon both captured the spirit of their times. The misattribution to the former fits because Comte was born in 1798, the same year Thomas Malthus published An Essay on the Principle of Population. The latter published his book, The Real Majority, in 1970, just around the time growth began to trail off. Malthus, of course, is famous for his theory that population grows until it exceeds the agricultural output, inevitably causing famine. Today we can produce more food per person living than ever before in history, and yet no developed country has a birthrate above replacement (2.1 children per couple). This has dire implications for growth.
The preeminent economist studying long-term growth, Robert Gordon (mentioned previously here), writes about four main headwinds to growth in The Rise and Fall of American Growth. The four are: inequality, demographics, education and government debt. We have dealt with inequality here. He gives education and government debt short shrift simply tying education back to inequality and debt to demographics. Gordon describes the demographic issue in a simple equation that defines GDP per capita (GDP/population) as output per hour (GDP/hours worked) times productivity (hours worked/population).
“The most important demographic events in the postwar United States were the baby boom of 1946 to 1964, the influx of women into the labor force between 1965 and 1995, and the retirement of the baby boom generation starting around 2008. The entry of the baby boom generation into the work force in the 1970s boosted hours per person, while the influx of women permanently raised the level of hours per person and raised its growth rate during the transition period, roughly 1965–95. Positive growth in hours per person allowed output per person to grow faster than labor productivity.”
Gordon goes on to discuss the general (under 55) decline in the labor force participation rate and a decrease in productivity. This points to some other kind of malaise best suited for a cultural or psychological/spiritual explanation. The point on productivity, however, is in part a demographic issue. The baby boom generation (those born 1946-1965), for as much flak as they get, is the second largest generation in American history and the largest repository of highly developed human capital.
After creating a glut of labor (driving down wages for the past 50 years), baby boomers are retiring en masse, taking with them their capital and skilled labor. We are facing a shortage of people in the trades, medicine, manufacturing and critical infrastructure. Many of our institutions were developed as baby boomers were growing up, so it is not particularly surprising that the highly specialized knowledge required to run and maintain these systems resides within that generation. It is also unsurprising that we have not made major upgrades to such systems in the last 50 years, and that the last two presidents each set the record for oldest president.
The two ways that countries grow older are living longer and having fewer children. Author and geopolitical commentator Peter Zeihan has put together some of the most accessible work on demographic collapse around the world.
Historically, families had fewer kids as they became wealthier because of lower demand for agrarian labor and decreases in childhood mortality. The improvements in public health, medicine and social welfare over the past 200 years so drastically increased life expectancy that despite families having slightly fewer children, populations steadily grew. These trends coincided with economic progress throughout the world as the United States, Europe and Asia industrialized. With longer life expectancy and fewer children, national populations skewed older.
These trends – increasingly sclerotic institutions, a shortage of labor and capital as baby boomers retire and growing entitlements – are a fairly recent phenomenon. The baby boomers mostly entered the workforce at a time when growth was just beginning to slow. While it is tempting to lay blame at the generation's feet, the demographic argument is largely an echo of the argument about shaking the tree of progress or one that can explain our particular present predicament, but not one that matches the quantitative evidence.
There is still one demographic issue we have only touched on. The U.S. has now had a baby boomer president for over 40 years in a row. The generation's beliefs, to the degree that one can claim a generation shares beliefs, has shaped culture, public policy and the economy. One such belief is neo-Malthusianism.
Project on the Predicament of Mankind
Rachel Carson, Paul R. Ehrlich, Garrett Hardin and Jane Jacobs were all popular authors in the 1960s, writing in opposition to modernist society. None of them were baby boomers, although their works (Silent Spring, The Population Bomb, Tragedy of The Commons and The Death and Life of Great American Cities) became popular with baby boomers. The single book that epitomizes the anti-growth movement is Limits to Growth, which sold over 40 million copies, and has a curious origin story. The book was the brainchild of an Italian industrialist and resistance fighter during WWII, Aurelio Peccei, who founded the Club of Rome. The Club commissioned a study by 17 researchers based on an MIT computer scientist's model. This report became Limits to Growth and was the antecedent to two less progressive arguments we will address in future pieces on culture and psychology/spirit. These arguments are the epicurean view that there are more important things than growth and the nihilistic view that growth itself is bad. To be fair to the first wave anti-growthers, they criticized growth from a position of advocacy not antipathy.
These neo-Malthusians believed that they were preserving progress and saving the world from three challenges, food scarcity, natural resource depletion and environmental degradation. Ehrlich and Hardin, the respective authors of The Population Bomb and Tragedy of The Commons, took a more classical Malthusian approach, but in retrospect, neither Malthusian nor Limits to Growth's neo-Malthusian claims have held up particularly well. That hasn't stopped the movement the books started from having a renaissance. We will address each challenge in order, and then turn to the arguments the authors make about why technology cannot save us from hitting growth limits.
After a preamble on exponential growth and a brief description of the Limits to Growth model, the book begins with some unnerving claims about our ability to feed humanity. According to the authors, in 1972: one third of the global population was inadequately nourished; half of all land suitable for agriculture (7.86B acres) was already under cultivation; the other half of suitable land was too expensive to make arable; even doubling crop yields would only delay inevitable famine; population doubles every 33 years. As mentioned above, population growth has fallen with population doubling from 1973 (3.84B) to 2018 (7.66B), a period of 45 years. It is expected to peak around 2070 (10.5B). The most obvious and impressive sign of progress since 1972 has been the Green Revolution, which increased crop yields up to 44%. As written about by economist Alex Taborrak here, this increase in yields not only made cultivated land more efficient, but also made land suitable for agriculture economically viable to develop. Oxford researcher Hannah Ritchie does a good job summarizing the work done by economists and ecologists James Rising, Charles Taylor, Erle Ellis and Kees Klein Goldewijk in the chart below.
While there remain many agricultural issues, such as water use, ecological damage, food waste and now the health problems caused by overabundance of food, the food scarcity claims of Limits to Growth are the easy to disprove.
The authors do raise good points about limited land and resources, an argument we previously discussed here. Concerning the exhaustion of natural resources, the authors make the claim that “the quantities of platinum, gold, zinc, and lead are not sufficient to meet demands. At the present rate of expansion . . . silver, tin, and uranium may be in short supply even at higher prices by the turn of the century.” History is replete with incorrect peak oil predictions, and the fracking boom unlocked at least 35% more natural gas, but they choose not to focus on fossil fuels. Curiously the example they choose to discuss in detail is the element chromium. Recent concerns over minerals have resurfaced as our energy system transitions away from the now-abundant fossil fuels towards metal-intensive renewables and batteries. While it is impossible to prove that market forces and technology will continue to find substitutes, new supply and more efficiencies, depletion estimates continue to be pushed back. Limits to Growth posited that by 2023 we'd be nearly half way to exhausting all known chromium deposits, 775 million metric tons at the time. Today, according to the US Geological Service, we sit at reserves of 12 billion metric tons.
The arguments made by Rachel Carson in her best seller Silent Spring and echoed by the Club of Rome focused on pesticide use, particularly DDT. Ironically, today's most pressing environmental issue, greenhouse gas emissions, is only given a scant four paragraphs in Limits to Growth, based mostly on the assumption that nuclear power could supplant fossil fuels. From here the authors turn to radioactive waste, toxic chemicals and DDT. We discussed this argument from the regulatory cost side previously and will address it in a future piece about risk aversion. For now, we will examine the logic of the Limits to Growth argument, which rests on the four assertions that pollutants: (1) grow exponentially (2) have unknown safe limits (3) have long half-lives and (4) are globally distributed.
The EPA, founded just seven year after Silent Spring and two years before Limits to Growth, largely succeeded in curbing DDT, acid rain, air pollutants and other environmental catastrophes. Not all pollutants have to grow exponentially. You may think that heavy handed environmental regulation comes at a great economic cost, but one must admit that it has succeeded in restoring damage to our environment and decreasing damage to human health. The other three assertions are more difficult to address because they are arguments of degree. The argument essentially boils down to this: there is some amount, time, or distance which is bad, and therefore any pollution is bad.
Having examined Carson, Ehrlich, Hardin and the Club of Rome's arguments, you may wonder why I included Jane Jacobs in this section. She was not known for catastrophizing about the environment or population growth. A contradictory figure, she was a propagandist, individualist, author and activist. Whatever you think of her legacy, views on urban planning and understanding of economics, Jacobs' opposition to utopian dreams had a profound effect on the American psyche. Her worldview can best be summed up by a quote from her book The Nature of Economies: "human beings exist wholly within nature as part of natural order in every respect."
Like Rousseau, Jacobs rejects Hobbesian distrust of the natural order. For Jacobs, progress is organic, evolutionary and in harmony with nature. If there is some sort of natural law that determines progress, attempting to violate it risks our downfall. But despite Jacobs' belief, progress is not some sort of emergent feature. We arrived at our standard of living through relentless technological advancement.
The Limits to Growth authors may have ignored technology as a factor in their model, but they were not so naïve as to dispense with technology altogether. Yet, instead of putting forth a cogent argument about human ingenuity and technology as an input into their model, they construct a number of arbitrary and unconvincing layers of defense: Nuclear energy won't make mining easier; cheap energy and resources won't stop population growth; even if pollution is controllable by technological and regulatory means, we will eventually run out of food; neither birth control nor the Green Revolution can be expected to prevent famine. Some of these defenses have already fallen to the steady march of progress, but as a failsafe, the authors were prepared for that as well. They end the technology section thus,
Numerous problems today have no technical solutions. Examples are the nuclear arms race, racial tensions, and unemployment. Even if society's technological progress fulfills all expectations, it may very well be a problem with no technical solution, or the interaction of several such problems, that finally brings an end to population and capital growth.
Here we get to the real argument, and the parallels with Jacobs become even more clear. What those concerned with demographics and natural resource exhaustion propose is a sort of harmonious agnosticism, devoid of will, agency and vision. As I indicated at the top of this piece, these arguments are the antecedents to epicureanism and nihilism. The supposedly sober and rational arguments inevitably lead to cultural and personal ones, but that is the topic for next week ...