Doom: for and against

but mostly against, by Russil Wvong

Note: when I wrote this, I was a little more optimistic than I am now. For my latest views, see the Global Issues FAQ.

Is capitalism sustainable?

A friend of mine once told me that he never wanted to have kids because "the world's too screwed up", and because he thought there were way too many people in the world already. His logic was simple: with six billion people in the world already, no end in sight, and a continuous stream of bad news about the environment -- global warming, rainforest destruction, air pollution, you name it -- aren't things just going to get worse and worse until there's some kind of horrible collapse?

Ken's a pessimist. Not everyone I've spoken to thinks the same way. Nevertheless, the overwhelming impression you get from watching TV or reading the paper is that we're doomed. Doom, doom, doooom.

Of course, doom has a certain appeal. If the world's going to end soon, why worry about insignificant problems like getting through school, finding a job, dating, paying bills, raising kids?

Personally, I think predictions of doom are exaggerated. Of course, I may be unjustifiably optimistic, but I have to admit, I worried about nuclear war when I was growing up. Now that the threat of global nuclear war has been lifted, I find it harder to worry about the imminent collapse of capitalism due to environmental destruction.

Over-consumption in rich countries

Why? It's true that if we run out of non-renewable resources like oil, we're going to have to make some drastic changes. But at the same time, it seems to me that in the rich countries, we use a lot more resources than we really need to. For example, in North American cities, a majority of households have at least one car. Most cars that you see on the road only have one person in them. Obviously, we're consuming a lot more steel and oil, and generating a lot more air pollution, than we would if we took the bus instead, or relied more heavily on bicycles, as is common in poor countries.

If the price of oil or steel suddenly doubled or tripled, we have a lot of room to cut back. No doubt it'd be difficult for people to give up the convenience of a car, and we'd complain a lot, but it wouldn't cause civilization to collapse.

So why don't we do this already? Why is it that we consume so much more than we need to? One reason is that we can afford to: in the end, you can only consume as much as you produce. In the US, productivity rose by 3% annually between 1947 and 1973, and it's risen by 1% annually since then. So we can afford to spend more.

Still, why would we want to spend more? If our grandparents could live on half of what we spend, why do we spend as much as we do? We could point fingers at big corporations and TV advertising, but perhaps there's a more fundamental reason: the desire for social status.

They reached a top flight, puffing for breath. They walked down a chilly hall with bare, graffiti-tagged walls. The graffiti was very subversive, neatly stenciled, highly politicized. Much of it was in English. TO BUY A NEW CAR WOULD MAKE YOU SEXUALLY ATTRACTIVE, insinuated one graffito. CONSUME MORE RESOURCES TO GRATIFY SHORT-TERM DESIRES, another suggested darkly.

--from Holy Fire, by Bruce Sterlinng

This very funny quote, from a science-fiction novel which takes place in a near-future world run by environmentally responsible gerontocrats, illustrates Thorstein Veblen's observation in The Theory of the Leisure Class: in all sorts of different societies, conspicuous waste is prominent as a way of gaining social status. If you can afford to waste money on an expensive car, obviously you must have a lot of money. (Merely saying "I have a lot of money" isn't nearly as effective: after all, you might be lying.) Ironically, the more useless and expensive something is, the more status you get from owning it -- consider the difference between owning an antique chair and owning a regular kitchen chair.

This suggests that there's no fundamental reason why we need to consume so much.

Along the same lines, a UN survey conducted by Ronald Inglehart ("The Diminishing Utility of Economic Growth", Critical Review, Fall 1996) suggests that above a certain level of consumption, you don't seem to get any significant benefit from the additional consumption. Suppose you plot average life expectancy against annual per capita income for all the countries of the world. You find that at the low end of the spectrum, in countries with a per-capita income of US $300, average life expectancy is 45 years. As average income rises, life expectancy rises with it. Life expectancy rises to 60-75 years between $1000 and $3000, and 75-80 years above $6000. But above the $6000 level, there doesn't seem to be much correlation between income and life expectancy; life expectancy is more dependent on lifestyle factors.

Similarly for more subjective indicators, like happiness. If you ask people in different countries about their subjective well-being, average the results, and plot them against average income, you find a tight correlation in poor countries, but practically no correlation above US $6000. Subjective levels of well-being are the same in South Korea (per-capita income US $7500) and Japan ($27,000).

What this boils down to is that in the rich countries, we're spending much more than we need to. Spending less and saving more would reduce our consumption of scarce resources, and reduce our pollution of the environment. A compact car is cheaper than a sport-utility vehicle, for example, reflecting its cost of production (i.e. the energy and materials used to make it); and it's also cheaper to operate, as it uses less gas. More drastically, taking the bus instead of owning a car would save you $5000 a year. There's all sorts of other ways to (a) save more and (b) consume less resources, which are of course the same thing: a smaller house, fewer gadgets, less elaborate lawn care.

An argument sometimes heard against reducing consumption is the argument that "the economy needs you": if you spend less, more people will be unemployed! Spend, spend, spend! You're benefiting your fellow worker!

Paul Krugman points out that while this was true in the bad old days of the Great Depression, when a decline in consumption could lead to a prolonged economic slump with high and sustained unemployment, it's not true any more ("Vulgar Keynesians", Slate Magazine, February 1997). Why not? To paraphrase Krugman, the answer can be summed up in two words: Alan Greenspan.

The level of unemployment is primarily determined through the Federal Reserve, through its control over interest rates. If demand drops, the Fed increases demand by lowering interest rates; if the economy starts overheating, the Fed raises them. If there were a sustained drop in consumer spending, the Federal Reserve would simply lower interest rates, causing investment demand to increase. There'd be a shift in employment -- less money spent on restaurant meals and more money spent on factories might mean fewer waiters and more machine-tool operators -- but the total level of unemployment wouldn't change.

Economic growth in poor countries

So much for the rich countries. What about the poor countries? 1.2 billion people live in absolute poverty, with income of less than $1 per day. 800 million people are chronically malnourished. And the world population is continuing to add 80 million people each year, nearly all in poor countries. Shouldn't this be grounds for pessimism?

First of all, although world population is continuing to increase, the rate of growth is slowing. According to the United Nations Population Information Network, fertility has dropped from 5 births per woman in the 1950s to 2.7 today. Making some assumptions about fertility, the world population is expected to grow from 6 billion in 1999 to 7 billion in 2013 (14 years), 8 billion in 2028 (15 years), and 9 billion in 2054 (26 years). Long-term projections indicate that it'll stop growing sometime in the 22nd century. Even by 2045-2050, the population of 56 countries -- including China! -- is expected to be declining.

In addition, a number of countries have made rapid economic progress over the last few decades, particularly in East Asia. Since Asia contains 60% of the world's population, this is important. Japan and the "four tigers" -- Hong Kong, Singapore, Taiwan, South Korea -- have caught up to the West. Malaysia, Thailand, Indonesia, and China are also developing rapidly. In China, agricultural production doubled in the 1980s, lifting huge numbers of people out of absolute poverty and malnutrition.

Assuming that this economic growth continues, and that it's possible for other poor countries to emulate the "Asian model" -- both non-trivial assumptions -- won't increasing levels of consumption destroy the environment? If hundreds of millions of Chinese consumers start driving, for example, won't the world's oil reserves rapidly be exhausted?

I think the answer is, probably not. Suppose gas cost $5 a litre, instead of 50 cents. Refilling your 30-litre gas tank would cost you $150 a week. Would you still buy a car? Or would you rather rely on the bus? What if it was $50 a litre?

As the demand for oil increases, the price isn't going to stay where it is; it's going to go up. As oil becomes scarcer and scarcer, the price will go higher and higher. And that means that fewer and fewer people will drive their own cars: they'll take the bus instead. Industry will look for ways to use less energy. Alternate energy sources which are unprofitable when you can buy a barrel of oil for $20 will become feasible when the price hits $100. The combined effect will be that as oil gets scarce, it will get more and more expensive; and accordingly, we'll use less and less of it. In the long run we'd probably still run out of oil -- it's not a renewable resource -- but it'll take much longer than you might think at first.

What's true for oil is true for other commodities. When the commodity is something that can we produce more of, like food, increased demand should also lead to increased supply, which has indeed been the case. The Economist notes that food production has increased by 20% per head since 1961, despite the fact that world population has almost doubled ("Plenty of gloom", 20 December 1997). In the Third World, calories consumed per capita per day are 27% higher today than in 1963. In part, this is due to "Green Revolution" pioneers such as Norman Borlaug.

What about pollution? We can think of the lack of pollution -- in other words, access to clean air and water -- as the desired commodity. In the rich countries, we're willing to pay for clean air and water, whether it's through increased environmental regulation or more sophisticated technology. This is one reason why Western Europe is less polluted than ex-communist Eastern Europe. As poor countries become richer, they should be able to afford cleaner air and water.

Paul Krugman's essay "Looking Backward" describes what the world might look like 100 years from now; in particular, considering the impact of densely populated, newly prosperous countries.

That isn't to say that the poor countries don't face huge challenges. They do; and they need help. The World Bank notes that although aid hasn't helped countries with bad economic policies and corrupt governments, which have mostly slipped backward, it can make a significant difference for countries with good economic policies and effective governments. Well-run countries which received little or no aid had economic growth of 2.2% annually, while those which received significant aid grew by 3.4%. ("How to make aid work", The Economist, 26 June 1999; Assessing Aid, World Bank, November 1998.

Summary and final thoughts

I think our prospects of doom are exaggerated. Population growth is slowing, and the world population will eventually stabilize at less than double its current level. As for over-consumption in rich countries, that'll be corrected by rising prices as poor countries become richer.

If you feel there's a disappointing lack of doom in this view of the future, and you're feeling the need for a more apocalyptic vision, take a look at any of the following Hong Kong movies. With the 1997 handover to China, there's plenty of doom-laden imagery. Doom, doom, dooooom!

And finally, if you buy my argument about things more or less continuing as they are, and you find the prospect of having to continue to deal with everyday problems to be rather depressing, you might want to check out The Road Less Traveled for some advice on life.

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Photo of Acura NSX by Philip Greenspun. Other images are from Ashes of Time.

6 July 1999

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