Your new book, The End of Growth, can you summarise what it’s saying, what the central argument is?
Right, well the central argument is that world economic growth is effectively over. It’s hedged a bit by saying of course we are still seeing economic growth in China, India and a few other countries. But I argue in the book that that’s only a temporary phenomenon; that economic growth in China is unsustainable for a number of reasons I outline. One of them of course is that China just doesn’t have enough coal to keep growing its economy.
I make that argument based on factors internal to the international monetary system saying that we’ve reached limits to debt, household debt in the US, and we’re nearing limits to government debt. Not necessarily theoretical, absolute limits but political limits. Many countries just aren’t willing to run up their debt that much further for fear of imperiling their national currency. We have a situation in the US where the federal reserve wants to continue with quantitative easing – pumping more money into the economy – which is the only thing that’s kept the economy going for the past couple of years, but trading partners – Germany, China and others – are reacting to that very angrily saying it’s unfair in terms of global trade; driving down the dollar to make US exports more attractive and so on.Read the whole interview: Part one here and part two here.
I don’t think a full blown currency war is in the offing but that does act as a kind of constraint on the ability of governments to intervene and prop up consumption any further. Does this mean that we’ve seen the end of economic growth? It think it’s a very big deal given that we have a monetary financial system that’s set up only to function in the context of growth – they way we loan money into existence for example. We no longer base money on precious metals or things like that, we create money by making bank loans, and that means if people aren’t taking up more loans that means the money supply starts to decrease as people pay off existing loans or default on them.
This is essentially what we’re seeing. It’s a system that is virtually designed to fail in the absence of economic growth. The last couple of chapters of the book are outlining what needs to happen if we’re going to avoid a wall of global financial failure. We have to get past that wall in order to deal with all the other problems we have, the financial problem is just one. I think it’s the most immediate, pressing problem that we have because if we don’t get past that, it will be almost impossible to master the political, economic resources to deal with things like climate change and resource depletion and rebuilding our transport infrastructure and reforming our food system and so on.
But we do have to do all those things too – so we have to get past that wall and then we have to do these other things. That’s a tall order! Right now, the governments of the world have no appetite for any of this. If they’re going to do these things it will only be the result of crisis – they’ll be forced to. Meanwhile, that crisis is going to come down on ordinary people and communities. So the last chapter in the book is about what we ordinary people need to be doing to protect ourselves from the worst consequences of all of this unravelling.
Read extracts from the book here.
An hour long interview with Post Carbon Senior Fellow Richard Heinberg about his new book The End of Growth. Download here.
Video: Richard Heinberg talks in Totnes on ‘The End of Growth’.
- Economic Contraction
- The breakdown of economic expansion in the 21st century
- The economy: Possible scenarios for the future. Part II. Part III.