Limited resources will stall economic growth

You’re unlikely to hear too many politicians calling for the economy to slow down. It would be political suicide. But can economic growth continue indefinitely?
The late economist Kenneth Boulding said "Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist." I guess he put most politicians in the former category!

Boulding was one of those rare individuals prepared to challenge accepted wisdom. He recognised that in a world of finite resources we can’t just keep growing.
Yet we are constantly told that continued economic growth is essential to our wealth and wellbeing. Even solving environmental and resource problems will require greater economic growth, or so we are told.

None of this is true, except in the context of our current monetary system, which is, after all, a purely human invention that can be changed. Economic growth is only necessary because of our heavy reliance on borrowed money and the need to repay interest.

While there are a growing band of economists who now recognise the need to reform our monetary system, they are mostly marginalised by those who benefit from the status quo.
Certainly technology has lead to great gains in productivity and a lot of economic growth is in services. Australia, like the USA, has largely moved its manufacturing sector to places like China and this gives the illusion that we can have growth without using more resources.

But it’s a bold economist that will claim that we can have continued economic growth without using more electricity, fuel, water and other resources. Since all of these are limited, economic growth will cease at some time in the future.
The 1972 Club of Rome report analysed projected global growth based on assumptions about populations, living standards and resource constraints. Their analysis revealed that the limits to growth would be reached within 100 years and that an uncontrollable economic collapse would occur unless the growth trends were altered. Their 2005 thirty year update confirmed that almost all of their predictions were “on track” and that no action had been taken to alter our fixation on growth. Their chilling conclusion was that collapse is now more likely and it will almost certainly occur within the lifetime of most people living today.

Sadly, most economists just don’t get it. As one of the greatest economists of the twentieth century, J.K. Galbraith said, "In economics, hope and faith coexist with great scientific pretension and also a deep desire for respectability."

This was originally published in the Fraser Coast Chronicle on 1 May 2007.