The growth = industry fallacy

On a random peregrination of the blogosphere, I stumbled on this at

The modern world depends on economic growth to function properly. And throughout the living memory of every human on earth today, technology has continually developed to extract more and more raw material from the environment to power that growth.

While the rest of the article is of some interest, this premise is a sadly very common fallacy. The first sentence is pretty debatable, but for today we will assume it true and concentrate on the implication of the second, that economic growth needs stuff.

At the dawn of the industrial revolution, a couple of centuries ago, you probably would have found people arguing that the economy could not grow much anymore, because all the land that was suitable for agriculture was already in use (in Europe) and demand was close to being fully satisfied, so there was no room for growth. They were even right: not only the land cultivated stayed more or less constant, but technological progress allowed the amount of human effort expended on growing food to be considerably reduced, to the current state of affairs, where, in developed countries, 2-3% of the workforce is all that is needed to feed everybody. This then allowed people freed from subsistence farming to move on to other activities, first via to the manufacture of objects, and then, in the West at first, to service industries.

Industry is the next agriculture: it’s becoming so efficient that we will soon probably need less than 10% of the workforce to manufacture every object desirable, within reason. The globalisation steps which saw manufacturing move to East Asia thanks to low labour cost will just be a parenthesis. As their labour costs increase during the normal course of development, they won’t even bother finding even cheaper countries to use the cheap labour of, but skip direct to further automation, which has great scope to be further implemented in a world where cheap labour has oft been chosen in the past in place of then more expensive automation. This applies even if the technology remained static, as the current state of the art of automated manufacturing allows to manufacture almost anything, it’s just a question of getting enough volume to justify the relatively steep capital outlay.

Politicians who care where widget are made are clearly living in the wrong century. Wherever it is done, it ultimately won’t keep many people busy. Only maintenance and monitoring staff are required once you’ve installed the machines built by other machines. This is a very good thing, the same as humanity freed itself from the burden of having to spend most of its time to feed itself, it can now free itself from the burden of having to manufacture widgets.

Once freed from that burden, people can do other things. They could choose to work less, as it requires less time to produce a constant material standard of living, but they can also choose to keep on being economically employed if they so wish, by moving to more abstract activities, that are not resource intensive. This can already be observed by looking at the difference in consumption between the middling sort and the proper well off in the West. The wealthy don’t eat more than trailer trash, indeed they probably eat a bit less in raw quantity. They may spend more money on food, but little of the difference will go to the resource intensive bit: a posh restaurant delivers approximately the same quantity of food as a fast food joint, it just deliver it in more style: you pay for the waiter, the cook spending more time on a sophisticated arrangement, the interior designer who chose the curtains, the marketing people who designed and sold the concept, etc. It’s more entertainment than catering: most of the staff involved in the restaurant experience are performers whose task is relatively light in the use of resource. Such freedom from materiality applies everywhere: for instance the wealthy do spend more on divorce: they employ lawyers and judges who build complex narratives on top of the simple story of a couple splitting up. The courthouse is also a form of entertainment: it’s where people tell stories to each other, like the theatre. And they can do that because they’ve freed themselves from having to hunt for food (or widgets) all day — but it’s a choice, they don’t have to, poorer people still do divorce sans decorum and probably enjoy the experience almost as much.

Back to economic growth, the move to abstract activities like all these forms of entertainment can expand as far as people wish them too. Humanity can easily keep itself busy all day with that, and other low-resource things like scientific research, and it can do that within the economic sphere if it so wishes. There is simply no dependency on raw materials for growth. The only constraint is a bit of imagination.

Besides the resource usage problem contains an intrinsically stable virtuous cycle: if there is a shortage of materials, materials-based activities become less desirable and so people will naturally move to less resource intensive alternatives, which become, relatively, more compelling. The opportunity cost of resource-based activities increase with every increment in the price of energy of raw materials. People don’t go on a two week holiday on the other side of the planet because they need to but because, for a moderately well-off Westerner at the current juncture, they can. The amount of extra enjoyment you get per kilometre compared to going to a similar location on one’s own continent is pretty minimal. If the fuel necessary for a return flight to the other side of the planet costs say a couple of years worth of that moderately well-off person’s income, they’ll think twice before going that far for a couple of weeks, but will surely replace it with a less resource intensive substitute, say a train trip, or an intensive yoga course, at probably very little cost in therm of loss of practical enjoyment, and causing no impairment to economic growth as human labour is just redirected towards new activities other than digging up stuff from the ground for the purpose of moving around just for the sake of it.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s