Enough Is Enough

by Rob Dietz

One statistic that contains critical information for understanding the status of energy supplies and assessing the prospects for continued economic growth is EROEI. EROEI stands for “energy return on energy invested.” It’s a ratio that explains how much energy we have to put in (e.g., in exploration, extraction, and transportation) to get a certain amount of energy back when exploiting any given energy resource. The disconcerting news is that EROEI has been declining for a number of energy sources over the history of their extraction and use. In 1930, EROEI for oil extracted in the United States was greater than 100 to 1.13 That means that for each unit of energy spent drilling and refining oil, we got back 100 units of energy. It was easy. All you had to do was sink a shallow well in the right place, and you could collect the gushing supply of energy-dense oil. By 1970, though, EROEI had decreased to 30 to 1. And by 2005, it was down to about 15 to 1.14 Other sources of energy, both domestic and imported, also show declines in EROEI over time.

  Meanwhile EROEI values for sources of renewable energy suggest that as we substitute solar panels and wind turbines for oil and coal, we can’t expect the returns on investment we’ve become accustomed to. For example, EROEI on wind turbines is about 18 to 1. On photovoltaic solar panels it’s 7 to 1. And on biodiesel fuel, it’s only 1.3 to 1.15 Declining EROEI has important implications for the economy because economic output is closely correlated with energy use (Figure 2.5).16 As conventional supplies of energy dwindle and low-EROEI supplies are used as substitutes, it will be harder and harder to maintain (let alone increase) economic output.

  However, in a report entitled Growth Isn’t Possible, the New Economics Foundation suggests that declining supplies of oil and natural gas may be less of a threat to economic growth than the carbon dioxide (CO2) emissions from burning them. The authors claim that peak oil production will not lead to economic collapse, but will likely result in greater use of liquid fuels derived from coal, resulting in even higher CO2 emissions.17 Thus, climate change may be the more pressing limit we face.

  The concentration of CO2 in the atmosphere has climbed 40 percent higher than its level at the beginning of the industrial revolution. In fact, CO2 concentrations are higher now than they have been at any other time during the last 800,000 years, maybe even the last 20 million years.18 In 2008, NASA climate scientist James Hansen and colleagues warned, “If humanity wishes to preserve a planet similar to that on which civilization developed and to which life on Earth is adapted, paleoclimate evidence and ongoing climate change suggest that CO2 will need to be reduced from its current 385 ppm to at most 350 ppm, but likely less than that.”19

  Leaders of financial institutions have also begun to question the possibility of continued growth. Jeremy Grantham is the cofounder of GMO, one of the largest investment funds in the world. In his first newsletter of 2011, he wrote, “The purpose of this [letter] … is to persuade investors with an interest in the long term to change their whole frame of reference: to recognize that we now live in a different, more constrained, world in which prices of raw materials will rise and shortages will be common.”20

  FIG. 2.5. Economic output (as expressed by GDP) and energy use are highly correlated. The data shown are for 175 countries in the year 2007. Exponential scales are used on both the x- and y-axes because GDP and energy use vary considerably across countries.

  SOURCE: see note 16.

  In a similar vein, the 2011 annual report of Portfolio 21, a global mutual fund with investments in socially and environmentally responsible companies, states, “Although the news media continue to focus on the upheaval and volatility of the financial markets as the top story, ecological limits to economic growth is the real story of the century. Environmental disasters have been intensifying as economic growth struggles against natural and man-made limits.”21

  When leading scientists, economists, investment professionals, and journalists begin to concur about the impossibility of perpetual economic growth, then enough begins to look like more than just a responsible alternative. It starts to look like the only option. As the next section explains, it may be preferable for other reasons as well.

  THE SOCIAL FAILURES OF ECONOMIC GROWTH

  Although economic growth has come at a large environmental cost, it has also brought many benefits. People can acquire more stuff than ever before, and some of that stuff, such as new medicines, better diets, and communication technologies, can help increase well-being. But does all the extra stuff make us better off? Mainstream economists seem to think so. They accept a largely unchallenged assumption that GDP and well-being are directly linked, and this assumption drives the call for continuous economic growth. It seems crazy not to test an assumption that underpins such important economic policy decisions.

  Let’s suppose for a moment that we could find a way to increase GDP without using up resources or negatively impacting the environment. Would continued GDP growth in wealthy countries like the United States or the United Kingdom still be a worthwhile pursuit? Would a larger economy improve quality of life, alleviate poverty, and provide full employment—or does further economic growth stand in the way of achieving these goals?

  Data from surveys of happiness and life satisfaction can help answer these questions. In such surveys, people are typically asked to rate their level of life satisfaction on a numerical scale (from zero to ten, for example). When these data are compared to GDP, a striking picture emerges. Although GDP per capita has more than tripled in countries like the United States and the United Kingdom since 1950, people have not become any happier (Figure 2.6).22

  When data are compared across countries, the picture becomes even more interesting. Happiness and life satisfaction do tend to increase with income, but only up to a point. Beyond an average national income of about $20,000 a year, additional money does not appear to buy additional happiness (Figure 2.7).23 That’s precisely the point that Jack Santa-Barbara perceived when he changed his career and decided to pursue his passion instead of more profit. Once people can meet their basic needs and access enough goods and services, economic growth fails to improve their lives.

  This finding seriously calls into question the continued pursuit of economic growth in wealthy nations. With global resource use already at an unsustainable level, further growth in these nations reduces the amount of ecological space available to poor countries, where economic growth could help lift people out of poverty.

  Nevertheless, it is often argued that global economic growth is the best way to reduce poverty in poor countries. After all, reducing poverty without global growth would require the redistribution of income from rich countries to poor countries. Given that the rich are more powerful than the poor, redistribution is often portrayed as being a less feasible option than growth. In the view of Anne Krueger of the International Monetary Fund, “Poverty reduction is best achieved through making the cake bigger, not by trying to cut it up in a different way.”24

  FIG. 2.6. Although GDP per capita has risen steadily in the United States since the end of World War II, the percentage of people who report being “very happy” has flatlined. SOURCE: see note 22.

  The ever-expanding cake is a seductive idea (or would be in the absence of biophysical limits), but it has not solved the global poverty problem, and shows no signs of doing so. Despite the twenty-five-fold increase in the size of the global economy over the past century, more than 1 billion people still live on less than $1 per day, and a total of 2.7 billion people live on less than $2 per day.25 Economic growth has been cited by the World Bank as the “essential ingredient for sustained poverty reduction.”26 But for every $100 of global economic growth that occurred between 1990 and 2001, only 60 cents went to people below the $1-per-day line. In other words, to get the poorest people of the world an extra $1 required a $166 increase in global production and consumption.27 Someone is profiting from economic growth, but it’s not the world’s poor.

  Nor is it the average citizen in wealthy countries. The benefits of economic growth have ac
crued mainly to the wealthiest members of society, and as a result income gaps have widened around the world. Over the past thirty years, the gap between the richest and poorest 10 percent of the U.K. population grew by almost 40 percent.28 The richest tenth now have incomes 14 times higher than the poorest tenth. In the United States, the income gap is even larger at 16 times.29 These gaps are deeply problematic. As Richard Wilkinson and Kate Pickett explain in their thoroughly researched book, The Spirit Level, high income inequality is associated with a multitude of health and social problems, including increased mental illness, more prevalent drug use, poorer physical health, lower life expectancy, inferior educational performance, heightened violence, and higher rates of imprisonment.30

  FIG. 2.7. Life satisfaction data for 141 nations suggest that once average income reaches a certain level (let’s call it enough), adding more income fails to buy more happiness. The data shown are average values for the years 2000 to 2009. SOURCE: see note 23.

  Moreover, the social failures of the growth model are not just limited to quality of life, poverty, and income inequality. They also extend to the goal of achieving full employment. Despite persistently rising GDP, the unemployment rate has bounced up and down over time. For example, in the United States over the last several decades, the unemployment rate has ranged from a low of 3.5 percent in 1969 to a high of 9.7 percent in 1982, and it has recently climbed above 9 percent again.31 The growth-based economy has not been able to guarantee full employment in the United States, largely because economic growth is an unstable “boom-and-bust” model. Periods of growth are inevitably followed by periods of recession, which are marked by significant job losses.

  Perhaps it’s not surprising that a policy of endless economic growth is destined to fail environmentally; common sense dictates that an economy cannot grow forever on a finite planet. What is surprising, however, is the way that growth is failing to achieve social goals. It is not providing lasting solutions to the problems of unemployment and poverty, and it is not making people any happier when they already enjoy enough goods and services. In the quest to lead fulfilling lives, consuming past the point of enough is an exercise in futility. The evidence suggests that most people living in wealthy countries already have enough material goods—the challenge is to figure out how to build an economy on something other than ever-increasing consumption.

  John Maynard Keynes, probably the most influential economist of the twentieth century, recognized this point. He wrote, “The day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied, by our real problems—the problems of life and of human relations, of creation and behaviour and religion.”32

  Keynes understood that a society’s ability to overcome scarcity—that is, to provision itself sufficiently with goods and services—could open a doorway to a better place. A society with enough as its goal could address higher needs and turn its attention to cultural and spiritual advancement. For wealthy nations, it appears that the day “not far off” has arrived.

  [ CHAPTER 3 ]

  HOW MUCH IS ENOUGH?

  This extraordinary ramping up of global economic activity has no historical precedent. It’s totally at odds with our scientific knowledge of the finite resource base and the fragile ecology on which we depend for survival.

  TIM JACKSON1

  Determining how big the economy can grow with respect to the biosphere is a problem of scale, and scale is a concept that confounds many people. I met one such confounded person during a bike trip along the Chesapeake and Ohio Canal. The C&O Canal cuts a narrow path for 185 miles through the leafy, rock-strewn countryside of Maryland. After its completion in 1850, barges loaded with coal, timber, and food floated down the canal from the hills of Maryland into the heart of Washington, D.C. For seventy-four years, mules walked the towpath, pulling the barges, until competition from railroads and relentless poundings from floods put the canal out of business.2

  But the C&O has lived a good life in its post-commerce years as a recreational respite from the hustle and bustle of Washington and other nearby towns. Along with its noteworthy scenery, the canal’s route wanders through the tumultuous history of the American Civil War. It includes such destinations as Harpers Ferry, where the abolitionist John Brown seized the federal arsenal, and Antietam, one of the bloodiest battlefields of the war. This rich history helped the C&O attain its status as a National Historical Park and avoid being swallowed by the urban sprawl that radiated from the national capital after World War II.

  The possibility of adventure along the canal and away from the city spurred my friend Dave and me to plan a bike trip from Washington to Antietam. Our itinerary called for a 60-mile ride to Harpers Ferry on the first day and a stay at a hotel there. Day two would entail an out-and-back 30-mile trip to Antietam. After another night’s rest at the hotel, we’d make our triumphant return to Washington on day three.

  It didn’t work out that way. The forces of nature and the overconfidence of youth conspired against us. On the first day, a drenching thunderstorm turned the towpath into a shallow creek and then into a wheel-grabbing mud-fest. We were so grubby by the time we made it to the hotel in Harpers Ferry that the staff cordoned off a corner of the dining room to quarantine us from the respectable patrons. Exhausted and defeated, we scrapped our plan for day two and decided to spend it watching movies instead.

  The next morning when we asked the smiling attendant at the hotel’s front desk if there was a nearby theater, she responded affirmatively. She pulled out a map and showed us the location of the theater. From the previous day’s ride, Dave and I had become experts at map reading; we had developed an almost supernatural ability to interpret a map route in terms of how we would feel riding it. The 10-mile distance to the theater was too far for our sore and weary legs. We handed the map back and told her as much. She pulled out a second map—a map showing a wider area—and in all seriousness said to us, “Hold on, it’s not that far.” She held her hand up at eye level, spread her thumb and index finger about an inch apart, and said, “Look, it’s only this far.”

  Had there been a globe sitting on the desk, she might have magically condensed the distance to the theater to a hair’s width. Dave and I traded a quick glance that said, “Is she for real?” and suppressed the urge to question the quality of public education in West Virginia. The cheerful concierge shared something in common with most economists. She had a poor grasp of scale.

  SUSTAINABLE ECONOMIC SCALE

  Scale is simply the size of one thing with respect to another. In cartography, it’s the distance on the map with respect to the distance in the real world. A map can have a written scale, such as “1 inch on the map = 1 mile on the ground”; it can have a graphic scale bar with a line or rectangle that represents a specific distance on the ground; or it can have a simple fraction or ratio. Whichever way a cartographer represents it, scale is essential to the map’s ability to convey useful information.

  The scale of the economy is its size with respect to the capacity of the ecosystems that contain it, and sustainable economic scale means that the economy does not exceed that capacity. It’s important to note that we’re talking about the biophysical size of the economy, not the monetary size as measured by GDP (although the two are related, as discussed in Chapter 2). Unfortunately there’s no simple scale bar or fraction to convey the scale of the economy, but let’s run through a quick thought experiment and pretend there is.

  Assume we have a scale of 1/8 for the world’s economy. An interpretation of this hypothetical scale is that the global economy appropriates one-eighth of the capacity of the earth’s ecosystems. In modern times, economists, financiers, and governments have sought to grow the economy at a rate of about 3 percent per year. If the economy achieves a 3 percent rate of growth, it doubles in size in about 23 years. (The rule of thumb for calculating the doubling time for exponential growth is to divide 70 by the percentag
e rate of growth; 70 divided by 3 comes out to about 23 years.)

  So over the course of 23 years, the scale of the economy increases from 1/8 to 2/8. In another 23 years, it doubles again, and the scale changes to 4/8. After another 23 years, the scale increases to 8/8. At this point, 69 years later, the economy would be using all of the capacity of the earth’s ecosystems. The numerator increases, but the denominator, which represents the capacity of our nonexpanding ecosystems, stays the same. If the Global Footprint Network’s calculations are correct (see Chapter 2), then the current scale of the global economy is something like 12/8. Such a scale seems impossible, but it can happen if we are liquidating stocks of natural resources. When economic growth is the goal, and when that goal is achieved at an exponential rate, the size of the economy quickly catches up to the limits of its containing ecosystems.

  This thought experiment simplifies reality a lot. It would be great to have such a straightforward scale calculation. If we knew the precise number of people that could occupy a given landscape and how much they could sustainably consume while living good lives, then we’d have a valuable reference point for deploying sound economic policies. The trouble is that the economy is a complex system, the biosphere is an even more complex system, and both are subject to a wide array of forces that can change how they function. Nonetheless, researchers have conducted some interesting studies to determine the sustainable scale of the human enterprise.

  Before examining some of this research, however, it’s worth stating a warning about predictions. Experts make awful predictions all the time. The best we can do in trying to sort out how things will go is to work with first principles, such as the laws of physics, and use the best data available. Even when experts employ such an approach, they are often laughably off target (weather forecasts offer a familiar example). That’s the nature of the game when analyzing complex systems. Joel Cohen, a leading scholar of population dynamics, remarks, “The Law of Prediction asserts that the more confidence an expert attaches to a prediction about future human affairs, the less confidence you should attach to it.”3