Book Review of The End of Growth: Adapting to Our New Economic Reality by Richard Heinberg

Glen T. Martin

 

This is one of the very few books that I would characterize as a “must read.”  Richard Heinberg has mastered a broad series of scientific studies and literatures in economics, including analysis of the 2008 world economic bubble and collapse along with an analysis of the global economic system of banking, money creation, growth, and debt. He has studied the literature on energy sources, their economics, use, and limits, on world production and trade issues in various major countries, and on resource extraction and use, including peak oil, food, and water. He cites the extensive literature on climate change and environmental limits, including pollution, environmental decline, and natural disasters.

He also describes what many thinkers have said about how we can adapt to this new reality with resiliency and a minimum of suffering. He expertly puts all this information together to make a formidable argument that we are at the end of the line for growth, that is, for the global economic system as we have known it for at least two centuries. We must urgently adapt to a post-growth world in order to avoid an inevitable planetary collapse that will cause devastation to human well-being throughout our planet.

The climate crisis cannot be addressed through further growth but only by transition to truly new age of steady-state economics, politics, and culture.  Part One of this review will summarize Richard Heinberg’s major arguments.  Part Two will examine his recommendations for adaptation to a steady-state, non-growth world system and assess the adequacy of these. It will point the ways in which he omits the urgent need to ratify the Constitution for the Federation of Earth.

Part One

Chapters 1 and 2 of The End of Growth examine the most recent worldwide economic collapse that began in 2008 with the collapse of the real estate market in the U.S. Heinberg examines the dynamics of this collapse. Citing many studies that have been done of the collapse, as well as the global capitalist system itself, he shows that this collapse went far beyond a U.S. real estate bubble to the very structure of the globalized banking, debt, and money creation system. Capitalism famously cycles through the creation of economic bubbles and collapses, including the big collapses of 1873, 1907, 1929, and 2008, with many small recessions in between (pp. 39-40).

Under this system, growth  (continued economic expansion) is an essential feature. Today, most money is created by banks under the fractional reserve system.  Under this system banks are required to keep on reserve a certain proportion of the money they lend to borrowers, say 3%.  This means that a bank may lend up to 97% beyond whatever actual assets it possesses. The money lent beyond its assets is created on a balance sheet and exists nowhere else. It is created as a virtual asset to the bank and as debt to the borrower, who promises to repay the loan with interest. In this system, banks are leveraged far beyond their actual assets and, if there are major defaults on these loans or a run on the bank by its clients, the bank fails and all this money and credit are lost, unless there is a bailout by the Federal Government or some larger bank swallows the failed bank and its toxic assets. This is not only true of individual banks but of the system as a whole: it is leveraged by debt far beyond its actual assets.

The assumption behind this entire system (today’s capitalism), therefore, is perpetual growth of the economy.  Loans are made in the fractional reserve system with the expectation (and assumption) that the borrower will be able to prosper (grow) in such a way as to be able to pay back both the principle and interest on the loan. Capitalism requires investments, continually renewed and growing investments. Most investments in new production initiatives or existing industries require borrowing with the expectation on the part of everyone that the enterprises will grow, flourish, and be able to pay back their loans with interest.

A bank will fail if it cannot make such loans and have them paid back through economic growth or sustained income on the part of the debtors. Similarly, nations operate under a similar debt system in which nations themselves borrow from the world banking system in order to invest in infrastructure and growth initiatives with the expectation that growth (measured in ever-increasing GDP) will allow them to pay back, a least eventually, the principle and interest on the loan. “The end of growth,” he writes, is the ultimate credit event, as everyone gradually comes to realize there will be no surplus later with which to repay interest on debt that is accruing now” (p. 103).

Under such a system, there is “a built-in expansionist imperative” (p. 37). Heinberg reviews the two main economic theories that developed with regard to this expansionist imperative in the 20th century. The great debate has been between the followers of John Maynard Keynes (Keynesians) and followers of “free market” thinkers like Friedrich von Hayek (often called neoliberals). The Keynesians advocate government regulatory intervention and significant spending in order to keep the system growing and healthy. Neoliberals advocate a free, laissez-faire market with minimum government interference. In both cases the assumption is that we need a “healthy” economic system premised on sustained growth.

Heinberg notes a number of contradictions within the system itself (pp. 40-41). But the most fundamental contradiction is the assumption that unlimited growth is possible on a finite planet in which there are limits to natural resources as well as the capacity of the planetary climate to regenerate itself sufficiently to sustain an ever-expanding industrial economy, ever increasing use of fossil fuels, and an ever increasing human population. He writes:

One such error is the belief that economies can and should perpetually grow…. This fundamental logical and philosophical mistake, embedded at the very core of modern mainstream economic philosophies, set society directly on a course toward the current era of climate change and resource depletion, and its persistence makes conventional economic theories—of both Keynesian and neoliberal varieties—utterly incapable of dealing with the economic and environmental survival threats to civilization in the 21st century. (pp. 39-40).

Chapter 3 is entitled “Earth’s Limits: Why Growth Won’t Return.”  Using extensive sources and the latest scientific and economic studies, Heinberg shows how we have reached “peak oil,” peak water, peak food production, and peak extraction of certain essential minerals. He points out that “peak” does not mean the end of these things but indicates that point at which production “achieves its maximum rate before beginning its inevitable decline” (p. 107).

Resources are exploited according to the “low hanging fruit” principle, which means the most accessible are taken first and then those more expensive to access and mine are exploited later. Oil companies are now undertaking mining in the deep ocean shelves and in the inhospitable Arctic regions, even though these operations are very expensive, because the easy access oil fields are declining in output and yielding less than the global demand. According to a report of the International Energy Agency (IEA), global crude oil production will likely never surpass its 2006 level, and fossil fuels from all other sources such as natural gas will likely peak about 2035 (pp. 107-08).

Water is used in practically all production processes, often in great quantities for cooling. It is even used in the extraction of much fossil fuel production. People, of course, need fresh water for drinking, washing, and cooking, and immense amounts of fresh water are used for irrigation to grow crops. Yet worldwide there is a growing shortage of fresh water and ominous signs of a coming severe global water shortage. The main sources of fresh water are the melt from snowpacks and glaciers, underground aquifers, and the world’s major rivers. All of these sources are rapidly and visibly shrinking. Aquifers are depleting faster than they are recharging, rivers are shrinking and in some cases drying up entirely, and snowpacks-glaciers are melting at rates that will mean the end of these water sources within just a few decades (pp. 124-29).

And the production of food is running up against severe environmental limits to its growth and portending its inevitable decline. This production requires not only great amounts of water but immense inputs of fossil fuel to run farm machinery, transport food to processing plants (and run the plants), and then get the food to local markets.  Around the world forests are being cut down to plant more crops, pesticides and fertilizers continue to pollute wetlands, fresh water, and oceans, agricultural lands are over-farmed and soil fertility accordingly diminished.  Food production has peaked and is beginning to rapidly decline.

In addition, oceans are severely over fished and the ecological resiliency of nature seriously diminished from all these sources. Plants require phosphorus for growth, and worldwide phosphorus mining has reached its peak production and is declining (p. 135). This means that a global food crisis is looming since, in the very process of producing food, we are destroying the biological base that makes that production possible (pp. 129-138). In addition, there are increasing natural disasters and accidents (such as the Deepwater Horizon oil blowout in the Gulf of Mexico), all of these limits working together to end the era of economic growth forever, a growth dependent on the very fossil fuels that are causing major climate change:

The billions of tons of carbon dioxide that our species has released into the atmosphere through the combustion of fossil fuels are not only changing the global climate but also causing the oceans to acidify. Indeed, the scale of our collective impact on the planet has grown to such an extent that many scientists contend that the Earth has entered a new geologic era—the Anthropocene. Humanly generated threats to the environment’s ability to support civilization are now capable of overwhelming civilization’s ability to adapt and regroup. (p. 145)

Heinberg spends all of Chapter 4 addressing the dogma of economics that claims these crises can be surmounted because of three key economic principles: substitution, efficiency, and innovation. Mainstream economists claim that energy, mineral, and other natural resources can find endless substitutions. Human creativity under a free market will endlessly be able to meet these challenges. Similarly, the market promotes ever increasing efficiency (for example, engines that burn fossil fuels more efficiently, machines that use less electricity per unit of power, or turbines in dams that produce more electricity per unit of water that drives the turbines).

Defnders of unending growth and “free markets” also often claim that innovations can be potentially limitless, for example, inventions to remove carbon dioxide from the atmosphere or to purify ocean water into fresh water. However, these arguments ignore that fact that there are absolute limits built into the laws of nature. For example, the second law of thermodynamics, the law of entropy determines that all forms of “organized” energy will run down, leaving unorganized thermal waste (e.g., burning the “organized” energy in fossil fuels inevitably produces,
“unorganized” waste in the form of heated gasses such as carbon dioxide). Hence, there are hard and fast limits to innovative improvements:

While we are never likely to reach zero in terms of time and cost, we can be certain that the closer we get to zero time and cost, the higher the cost of the next improvement and the lower the value of the next improvement will be. This means that, with regard to each basic human technological pursuit (communication, transportation, accounting, etc.) we will sooner or later reach a point where the cost of the next improvement will be higher than its value…. For many consumer products this stage was reached decades ago. (pp. 176-77)

Chapter 5 reviews the evidence for these contentions in terms of “competition and relative growth in a finite world.” Heinberg reviews the China growth phenomenon, geopolitics, currency wars, population stress, and the post-growth conflict between rich and poor. His informed discussions of each of these issues corroborate the central thesis of this book: growth has ended, and, while relative growth is possible here and there, the global economy, energy consumption, debt and loan development scenarios, indeed, the entire idea of endless economic “development” is at its end, never to be revived.

The last two chapters (6 and 7), address the ways we can manage the inevitable contraction, and the ways in which the concept of growth will necessarily change from quantitative growth (of Gross Domestic Product, GDP) to qualitative, non-economic growth (improvements in the quality of life, the meaningfulness of communities, and focusing on meaning and value rather than economic growth and expansion. If we continue in denial, however, and continue thinking that growth can be resumed with the right stimulus measures in the form of interest rates, tax deductions for investors, etc., then we may well experience a catastrophic global meltdown unlike anything ever previously seen in history (pp. 233-36).

Recognizing the dynamics of our current situation, however, could lead governments to take measures that would not circumvent the crisis, which is impossible, but at least minimize its impact and more justly equalize the painfulness of the contraction. It would require “a radical simplification of the economy,” for which a general reorganization and transformation would be required. Two options stand out. First, we could “slice a decimal place off everyone’s debts,” including businesses, while at the same time protecting assets below a certain level (to protect the poor). Those who have little or no debt could be compensated accordingly with money added equitably to their accounts. This would be very painful, but would constitute a necessary “re-set” in the relationship between the rich and poor in terms of real assets (p. 238).

Secondly, as Ellen Brown suggests in The Web of Debt: The Shocking Truth about Our Money System, we could convert to public banking with the government creating debt-free money to address the crisis and ensure that neither chaos nor corruption would ensue.  Some combination of these two options might make our economic and financial systems “more sustainable and resilient” to face the inevitable climate limits and disasters to come. The present debt-driven system of financial speculation and borrowing with the intention of perpetual growth would need to be given up entirely. We would have to “reinvent money” in ways that did not make its value dependent on speculative money markets.

Part of Chapter 6 and Chapter 7 examine the new “post-growth” economic systems proposed by various thinkers within the growing literature on this subject.  Heinberg cites a number of thinkers who have proposed an alternative economics relevant to the present crisis: Frederick Soddy, Henry George, Thorstein Veblen, E. F. Schumacher, Nicholas Georgescu-Roegen, Herman E. Daly, etc. He quotes Daly concerning a “steady-state economy” which consists of “an economy with constant stocks of people and artifacts, maintained at some desired, sufficient levels by low rates of maintenance ‘throughput,’ that is, by the lowest feasible flows of matter and energy from the first stage of production to the last stage of consumption” (p. 250).

Measures of success of such economic systems could not, of course, consist in increasing GDP. Heinberg reviews the several alternative models for success that have been developed—from the “Genuine Progress Indicator (GPI)” to the “Gross National Happiness (GNH)” measure to the “Happy Planet Index (HPI).” For example, the Gross National Happiness measure assesses success across nine dimensions: “time use, living standards, good governance, psychological well-being, community vitality, culture, health, education, ecology” (pp. 256-259). Hence, “progress” can be made in all these dimensions and would no longer be simplistically reduced to economic growth of GDP.

The final chapter (7) explores a range of literature envisioning alternative community and lifestyle models that are consistent with sustainability. There are “transition towns,” “common security clubs,” and “community economic laboratories” springing up all around the world. People are cooperating at the community level to begin living without fossil fuels, off the electric grids of big utility companies, and out of the big commercial banking systems (and into community credit unions or other people’s run banks).

Others are forming food coops and often growing much of their own food. They are forming community health clinics independent of big government or corporate health systems. They are sharing tools, developing their own alternative currencies, engaging in labor/barter transactions. All in all, they are creating resilient and independent local communities that will be much more likely to flourish as the globalized economy fails and the great contraction and transition takes place.

Heinberg ends the book by placing our current crisis within a broad perspective of the great transitions that human civilization has previously made. First, was the harnessing of fire nearly two million years ago. Second was the development of language. Third was the agricultural revolution 10,000 years ago. Fourth was the industrial revolution about 200 years ago. The fifth transition is the great contraction of today:

Now we are participating in the turning from fossil fueled, debt-and growth-based industrial civilization toward a sustainable, renewable, steady-state society. While previous turning entailed overall expansion (punctuated by periodic crises, wars, and collapses), this one will be characterized by an overall contraction of society until we are living within the Earth’s replenishable budget of renewable resources, while continually recycling most of the minerals and metals that we continue to use…. The remainder of the current century will be a time of continual evolution and adaptation…which will itself be a dynamic rather than a static condition. (p. 284).

Part Two

 Richard Heinberg does not mention the industrial-military complex that has dominated the economics of the United States and most of the world since World War II. His book does not mention war or militarism or global state-sponsored terrorism in which the top-secret intelligence agencies of the major imperial nations set up false-flag bombings, assassinations, and sponsor proxy terror forces from ISIS to Al Qaeda in the interest of imperial power and domination (see, e.g., Engdahl 2016). Nor does this book mention nuclear weapons or the global development of other forms of weapons of mass destruction.

He cites a great deal of literature on alternative communities and local, self-sufficient transition towns but makes no mention of the probable need of these towns to defend themselves against aggression and terrorism.  How will they do that?  The only possible assumption (hidden behind Heinberg’s conception of the world in transition to a steady state) is through continued nation-state militarism, international conflict, mistrust, and espionage. He never mentions the absolute need to change this system.

Is what he recommends a truly steady-state world?  Or is it a world cloaked in assumptions about the nation-state system that are totally out of date and contra-indicated to a sustainable future?  An apparent background assumption, for Heinberg, involves the industrial military complexes of the world continuing in order to protect American or British territorial sovereignty and allow his “transition towns” to flourish and spread. But, of course, to retain the industrial military complex is to retain a significant portion of the old growth and debt economic system. Vast sums of debt-created money and immense waste of the world’s precious resources are inescapably necessary for all militarism.

What if Russia or China or Iran do not go along with the great contraction and downsizing?  What if they find ways to retain their military and nuclear weapons and pose a threat to the territorial sovereignty of the US and UK where transition towns are flourishing and spreading?  In that case, to defend these contracted, sustainable communities, their governments will have to spend 50% of their wealth to feed the military complex and will have to attempt to grow in order to finance this monster.  We have come right back to the fundamental contradiction. Heinberg recommends that we shave one decimal point off all debt, but he never recommends abolishing the military monster sucking dry the economies of every major nation.

The truth of the matter is that Heinberg does not envision a truly transformed world. He does not consider the fundamental factors of national sovereignty and security. Under the fragmented world of militarized sovereign nation-states, the transition envisioned by Heinberg simply cannot happen. There are always enemies under the present world system. They do not trust one another, and under this world system, war alone can solve fundamental disputes between nations. There are no legitimate, enforceable laws for our planet as a whole. The U.N. is simply a treaty of militarized sovereign nation-states, as well as colonized by the economic growth model. It is part of the problem rather than the solution.

As with so many environmental experts exposing the crisis the world is faced with and advocating immediate radical changes, Heinberg’s account slips back and forth from a world analysis to national recommendations for the USA, without ever acknowledging this immense contradiction. Which is it?  Do we need global transformation of economics, politics, and culture to deal with the end of growth and the climate crisis?  Or do we need the 5% of the world’s population in the U.S. to eliminate debt-based banking, mainstream growth economics, along with its entire fossil fuel economy?

Heinberg is clear that the entire world has embraced this same debt-based, growth mandated, high risk economic system, a system that he argues has crashed for the last time in the 2008 global economic crisis and can never recover because we are at the end of everything (peak oil, peak water, peak food, and super-peak debt). He cites the bail outs for that crisis in many billions of dollars that were taken by all the major countries, not only the U.S.  He cites the growth dogma at the heart of the economic policies of all the major nations and the role of the International Monetary Fund (IMF) as, in some ways, the world’s central bank, encouraging growth and debt.

But when it comes to the new economics, politics, and culture that will emerge during and after the great contraction and transition, the world system of militarized, competitive nation-states is not mentioned. Perhaps the global industrial-military complex just painlessly vanishes into the background, going down without a fight?  Perhaps the nonsense dogma that the military of each country provides jobs for their citizens also just vanishes like the morning fog?  Heinberg’s account of the new world after the collapse and transition is hopelessly inadequate and unconscionably naïve.

This is a shame because his book is on the mark concerning the global capitalist economic system as a major cause of climate crisis, and as having reached the final end of its life-span leaving humanity facing the pain of contraction and transition to a more rational, sustainable, and just world economic system. The Constitution for the Federation of Earth provides that system. It provides a politics of cooperation and holism among all peoples and nations, rather than hate, fear, and suspicion. It provides for demilitarization of the world and transition to cooperative, integrated decision-making representing the equitable best interests of people everywhere (not just the U.S. or U.K. or China or Russia or India, all of whom now operate on the basis of their perceived national self-interests).

All these aspects of a transformed world system go together. We must solve the problem of militarism and war, for it is part of the same failed world system that has led us to climate collapse.  We must solve the problem of radical disparities in wealth through creating a just world system. We must address the problem of global human rights violations as part of this same solution to climate collapse. The Earth Constitution integrates all these global issues together within a planetary framework designed to democratically and effectively deal with them.

Perhaps most fundamental is that the Earth Constitution gives us debt-free, global public banking, freeing humankind once and for all from the absurd debt-based system of modern capitalism. It gives us one universal currency, not based on debt, but stable and valued the same everywhere. This is an absolute key to creating planetary justice along with addressing the climate crisis. The capitalist banking casino is also a casino of national currencies in which entire nations can be brought down through manipulations of the value of their currencies. This system of domination by private, debt-driven banking cartels must necessarily end if we are going to transition to a sustainable, equitable, peaceful, and rational world system.

Ratification of the Constitution for the Federation of Earth is the most effective method of transition. Otherwise nations will be militarily competing for water, food, and essential minerals, and the world system will continue as a war system, rather than a peace, prosperity, and sustainability system.  Transition towns, and local resilient communities are essential, but this emphasis on “small is beautiful” gives us only half the story. What are we going to do about the world system as a whole?  It cannot continue to be a militarized system of some 193 rogue nations recognizing no enforceable laws above themselves. It has to become global democracy in which everyone is on the same peaceful, legal, and cooperative page.

The local must be empowered to become sustainable and reasonably self-sufficient while the global must become unified, democratic, and demilitarized. The two are inseparable. You cannot have local self-sufficiency (no longer dependent on global fossil fuel shipping and manufacture) without having global coordination, mediation, communication, and justice-making to make sure than none of the local parts decide to make an exception for themselves by invading the others for resources, water, wealth, or food. Human beings must cooperatively share the Earth’s essential resources, not pretend (as does the UN) that these are the “private property” of the nations where they happen to be located).

And we will not make a successful transition to sustainability without advanced technology spread equitably across the globe. (Not protecting wealthy corporate profits through intellectual property rights but provided to people everywhere as necessary for sustainability.) Local communities with picks, shovels, and hand tools will not give us a sustainable world system without advanced solar panels, the latest battery technology, wind technology, advanced water irrigation systems, scientific monitoring of ecosystem health, and vast projects to restore our global forests, wetlands, farmland ocean integrity, etc. The biosphere of our entire planet needs restoration as far as is still possible. How will Heinberg’s “transition towns” undertake this vast global initiative?

All of this is provided for by the Earth Constitution and none of this is considered by Richard Heinberg as a necessary aspect of the great contraction and transition we are facing. His book is excellent on the problems we face, problems created by the growth dogma and debt-based capitalism, which he calls “the underlying contradiction at the heart of our entire economic system—the assumption that we can have unending growth in a finite world” (p. 20). But his solution is confused and self-contradictory, ignoring as it does the problem of militarized sovereign nation-states, the military industrial complex, and a world system designed for competition, suspicion, subversion, and war, rather than peace, justice, sustainability, and the rule of law.

If we want the truly new era that he advocates, we must deal not only with the failed global economic system but also with the failed global system of militarized nation-states that is the necessary complement and institutionalized support of that economic system. The two aspects of our world system go together inescapably.

Both are transformed within the Constitution for the Federation of Earth into a global peace system, justice system, freedom system, and sustainability system, designed to empower local, sustainable, reasonably self-sufficient communities everywhere on Earth. The most effective single action we can take to deal with climate crisis and the end of growth is committing ourselves to ratification of the Earth Constitution.

 

 

 

Brief Bibliography

 

Boswell, Terry and Christopher Chase-Dunn. 2000. The Spiral of Capitalism and Socialism: Toward Global Democracy. Boulder, CO: Lynne Rienner Publisher.

 

Daly, Herman E. (1996). Beyond Growth: The Economics of Sustainable Development. Boston: Beacon Press.

Engdahl, F. William. 2016. The Lost Hegemon: Whom the Gods Would Destroy. Wiesbaden, Germany: mine.Books.

Harris, Errol E. (2014). Earth Federation Now!  Tomorrow is Too Late. Second Edition. Appomattox, VA: Institute for Economic Democracy Press.

Heinberg, Richard (2011). The End of Growth: Adapting to Our New Economic Reality. Gabriola Island, BC: New Society Publishers.

Martin, Glen T. (2013). The Anatomy of a Sustainable World. Appomattox, VA: Institute for Economic Democracy Press.

Martin, Glen T. (2018). Global Democracy and Human Self-Transcendence: The Power of the Future for Planetary Transformation. London: Cambridge Scholars Publishers.

Petras, James and Henry Veltmeyer. 2005. Empire with Imperialism: The Globalizing Dynamics of Neo-liberal Capitalism. London: Zed Books.

Schumacher, E. F. 1973. Small is Beautiful: Economics as if People Mattered. New York: Harper & Row.

Valentine, Douglas. 2017. The CIA as Organized Crime: How Illegal Operations Corrupt America and the World. Atlanta, GA: Clarity Press, Inc.