Madmen and Economists

Download (PDF, 5.46MB)

INTRODUCTION

“Anyone who believes in indefinite growth in anything physical, on a physically finite planet, is either mad or an economist.” — Kenneth E. Boulding (1910-1993)

Why Are Economists Addicted to Growth?

Economists (with a few notable exceptions) have long behaved as though growth were synonymous with economic health.

If the gross national product of a country increases steadily by 4 percent per year, most economists express approval and say that the economy is healthy.

If the economy could be made to grow still faster (they maintain), it would be still healthier.

If the growth rate should fall, economic illness would be diagnosed. However, it is obvious that on a finite Earth, neither population growth nor economic growth can continue indefinitely.

But why do economists cling almost religiously to the idea of growth?

In general, growth brings profits to speculators. For example, purchase of land on the outskirts of a growing city will be rewarded as the land increases in value.; and when the economy grows, stocks rise in value.

Today, as economic growth falters, the defects and injustices of our banking system have come sharply into focus, and light has also been thrown onto the much-too-cozy relationship between banking and government.

The collapse of banks during the subprime mortgage crisis of 2008 and their subsequent bailout by means of the taxpayer’s money can give us an insight into both phenomena the faults of our banking system and its infiltration into the halls of government.

The same can be said of the present national debt crisis in the Euro zone and elsewhere.

One feature of banking that cries out for reform is “fractional reserve banking”, i.e. the practice whereby private banks keep only a tiny fraction of the money entrusted to them by their depositors, and lend out all the remaining amount.

This book draws heavily on chapters that I have previously published in various books, but a considerable amount of new material has also been added.

By doing so, the banks are in effect coining their own money and putting it into circulation, a prerogative that ought to be reserved for governments. Under the system of fractional reserve banking, profits from any expansion of the money supply go to private banks rather than being used by the government to provide social services.

This is basically fraudulent and unjust; the banks are in effect issuing their own counterfeit money.

When the economy contracts instead of expanding, the effect of fractional reserve banking is still worse. In that case the depositors ask the banks for their money, which it is their right to do.

But the banks do not have the money – they have lent it out, and thus they fail. However, the bankers have insured themselves against this eventuality by buying the votes of government officials.

Thus the banks are bailed out and the taxpayers are left with the bill, as in the recent example in which the US Federal Reserve secretly gave 7.7 trillion of the taxpayers’ dollars to bail out various banks.

Information-Driven Population Growth

Today we are able to estimate the population of the world at various periods in history, and we can also make estimates of global population in prehistoric times.

Looking at the data, we can see that the global population of humans has not followed an exponential curve as a function of time, but has instead followed a hyperbolic trajectory.

At the time of Christ, the population of the world is believed to have been approximately 220 million. By 1500, the earth contained 450 million people, and by 1750, the global population exceeded 700 million.

As the industrial and scientific revolution has accelerated, global population has responded by increasing at a break-neck speed: In 1930, the population of the world reached two billion; in 1958 three billion; in 1974 four billion; in 1988 five billion, and in 1999, six billion.

Today, we have reached 7.7 billion, and roughly a billion people are being added to the worlds population every fifteen years. As the physicist Murry Gell-Mann has pointed out, a simple mathematical curve which closely approximates the global population of humans
over a period of several thousand years is a hyperbola of the form P = 190,000,000,000/(2025-t). Here P represents the global population of humans and t is the year.

How are we to explain the fact that the population curve is not an exponential? We can turn to Malthus (Appendix A) for an answer: According to his model, population does not increase exponentially, except under special circumstances, when the food supply is so ample that the increase of population is entirely unchecked.

Malthus gives us a model of culturally-driven population growth.

He tells us that population increase tends to press against the limits of the food supply, and since these limits are culturally determined, population density is also culturally-determined.

Hunter-gatherer societies need large tracts of land for their support; and in such societies, the population density is necessarily low.

Pastoral methods of food production can support populations of a higher density. Finally, extremely high densities of population can be supported by modern agriculture.

Thus, Gell-Manns hyperbolic curve, should be seen as describing the rapidly-accelerating growth of human culture, this being understood to include methods of food production.

If we look at the curve, P=C/(2025-t), it is obvious that human culture has reached a period of crisis.

The curve predicts that the worlds population will rise to infinity in the year 2025, which of course is impossible.

Somehow the actual trajectory of global population as a function of time must deviate from the hyperbolic curve, and in fact, the trajectory has already begun to fall away from the hyperbola.

Because of the great amount of human suffering which may be involved, and the potentially catastrophic damage to the earths environment, the question of how the actual trajectory of human population will come to deviate from the hyperbola is a matter of enormous importance.

Will population overshoot the sustainable limit, and crash? Or will it gradually approach a maximum? In the case of the second alternative, will the checks which slow population growth be later marriage and family planning? Or will the grim Malthusian forces, famine, disease and war, act to hold the number of humans within the carrying capacity of their environment?

We can anticipate that as the earths human population approaches 10 billion, severe famines will occur in many developing countries. The beginnings of this tragedy can already be seen. It is estimated that roughly 30,000 children now die every day from starvation, or from a combination of disease and malnutrition. 11 million children die in this way every year.

Beyond the Fossil Fuel Era

An analysis of the global ratio of population to cropland shows that we have probably already exceeded the sustainable limit of population through our dependence on petroleum: Between 1950 and 1982, the use of cheap synthetic fertilizers increased by a factor of 8.

Much of our present agricultural output depends on their use, but their production is expensive in terms of energy. Furthermore, petroleum-derived synthetic fibers have reduced the amount of cropland needed for growing natural fibers, and petroleum-driven tractors have replaced draft animals which required cropland for pasturage.

Also, petroleum fuels have replaced fuelwood and other fuels derived for biomass. The reverse transition, from fossil fuels back to renewable energy sources, will require a considerable diversion of land from food production to energy production.

Thus there is a danger that just as global population reaches the unprecedented level of 10 billion or more, the agricultural base for supporting it may suddenly collapse. Ecological catastrophe, possibly compounded by war and other disorders, could produce famine and death on a scale unprecedented in history – a disaster of unimaginable proportions, involving billions rather than millions of people.

Unless efforts are made to stabilize and ultimately reduce global population, there is a serious threat that climate change, population growth, and the end of the fossil fuel era could combine to produce a large-scale famine by the middle of the 21st century.

As glaciers melt in the Himalayas and the Andes, depriving India, China and South America of summer water supplies; as sea levels rise, drowning fertile rice-growing regions of Southeast Asia; as droughts reduce the food production of North America and Southern Europe; as groundwater levels fall in China, India, the Middle East and the United States; and as high yield modern agriculture becomes less possible because fossil fuel inputs are lacking, a global famine involving billions of people rather than millions, may occur.

What Would Malthus Say Today?

What would Malthus tell us if he were alive today? Certainly he would say that we have reached a period of human history where it is vital to stabilize the worlds population if catastrophic environmental degradation and famine are to be avoided.

He would applaud efforts to reduce suffering by eliminating poverty, widespread disease, and war; but he would point out that, since it is necessary to stop the rapid increase of human numbers, it follows that whenever the positive checks to population growth are removed, it is absolutely necessary to replace them by preventive checks.

Malthus’ point of view became broader in the successive editions of his Essay; and if he were alive today, he would probably agree that family planning is the most humane of the preventive checks.

Eliminating Poverty and War

In most of the societies which Malthus described, a clear causal link can be seen, not only between population pressure and poverty, but also between population pressure and war.

As one reads his Essay, it becomes clear why both these terrible sources of human anguish saturate so much of history, and why efforts to eradicate them have so often met with failure: The only possible way to eliminate poverty and war is to reduce the pressure of population by preventive checks, since the increased food supply produced by occasional cultural advances can give only very temporary relief.

Today, the links between population pressure, poverty, and war are even more pronounced than they were in the past, because the growth of human population has brought us to the absolute limits imposed by ecological constraints.

Furthermore, the development of nuclear weapons has made war prohibitively dangerous.

How Many People Can the Earth Support in Comfort?

The resources of the earth and the techniques of modern science can support a global population of moderate size in comfort and security; but the optimum size is undoubtedly much smaller than the world’s present population. Some experts estimate that a sustainable global population would have to be aslow as 2 billion.

Given a sufficiently small global population, renewable sources of energy can be found to replace disappearing fossil fuels.

Technology may also be able to find renewable substitutes for many disappearing mineral resources for a global population of a moderate size.

What technology cannot do, however, is to give a global population of 10 billion people the standard of living which the industrialized countries enjoy today.

Read the entire book above or download it here.

We thank John Scales Avery, a renowned intellectual, EACPE board member, and theoretical chemist at the University of Copenhagen, for giving us permission to reproduce his latest book for EACPE.