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An introduction

An introduction. Outline. Economic growth in figures – GDP Limits of growth – ecological footprint, peak oil and climate change Decoupling – more growth with fewer resources? Promise and reality of economic growth Is sustainable growth possible? Outlook. 2. Gross Domestic Product (GDP).

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An introduction

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  1. An introduction

  2. Outline • Economic growth in figures – GDP • Limits of growth – ecological footprint, peak oil and climate change • Decoupling – more growth with fewer resources? • Promise and reality of economic growth • Is sustainable growth possible? • Outlook 2

  3. Gross Domestic Product (GDP) • The Gross Domestic Product (GDP) measures the economic performance of an economy in a given period of time. • Basis: the value of all domestically produced goods and services (value creation), providing they are not used for the production of other goods and services. • The rate of change of GDP adjusted for inflation is used as a measure of economic growth. As a result, GDP is the single most important figure in a country’s national accounts. 3

  4. GDP in Germany (bn €) Source: German Federal Statistics Office 4

  5. What GDP does not measure... • The role of the informal sector (e.g. flea market sales) is merely estimated • Child-raising/unpaid work (e.g. caring for a relative) • Distribution of profits and income • Social added value of the goods and services produced • External effects (e.g. resource consumption) 5

  6. ...and GDP is growing... Source: W. Broemme /pixelio.de 6

  7. Problem A globally expanding economic model is on collision course with the ecological capacity of the planet 7

  8. Ecological footprint • The ecological footprint calculates all the resources needed for our everyday life, and indicates the surface area required to provide the energy and raw materials we consume. • This surface area is then calculated for the total population and compared with the actual available surface on Earth. • Our ecological footprint is therefore a measure of our environmental impact. • The average human consumes Ø2.2 gHa (global hectares). However, we have only 1.8 gHa per person at our disposal. 8

  9. Our global ecological footprint 9

  10. Ecological limits • Growth is essentially based on oil and natural gas: ... as energy sources ... as raw materials in the manufacture of countless products (e.g. plastic) • Each oil and natural gas well has a production profile which begins at zero, rises to peak production, and returns to zero over time • Together, all the oil and gas sources in the world make up global capacity • Like any individual well, global capacity also has its peak 10

  11. Peak oil/Peak everything?! • The fact that the world is headed for peak oil and peak gas, i.e. global peak production, is not generally disputed. The only question is, when will peak oil and peak gas occur, and how will we react to this challenge? Source: motortalk.de 11

  12. Peak everything • This principle does not just apply to oil and gas, but to almost all non-renewable resources. • Our society is faced with an unprecedented situation: the impending depletion of many important raw materials upon which we currently rely: • e.g. coal, iron, farmland, phosphorus, rare earth elements, special raw materials, drinking water, etc. 12

  13. Climate change • Human activity affects global warming. • The gases which contribute the most to climate change are carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O). • The high –and growing – consumption of resources and fossil fuels necessary to all human activity are causing climate change on a massive scale. 13

  14. Effects of Climate Change • Foreseeable effects of climate change over the coming decades include a rise in extreme weather events such as higher rainfall, flooding, droughts and storms. • An increase in the number and intensity of extreme weather events will result in considerable economic losses. 14

  15. Decoupling • Decoupling: the economy continues to grow, without increasing resource consumption (CO2 emissions per unit of GDP) • Relative decoupling: resource consumption grows at a lower rate than GDP • Absolute decoupling: resource consumption falls while GDP rises • In the Global North: relative decoupling is being achieved • HOWEVER: measuring resource consumption per unit of GDP at national level distorts the real responsibilities, as many resource-intensive products are imported 15

  16. Decoupling • Given the problem of ecological limits, what we need is absolute decoupling → but this is not in sight! • Economic growth of 3% would cause GDP to quadruple in 50 years. • In order to achieve the two-degree target (IPCC), absolute CO2 emissions would have to fall by around 80% by 2050. This would mean reducing resource consumption per euro to one twentieth in the period from 2000 to 2050. • Another problem is what is known as the rebound effect. When resource efficiency increases, use becomes cheaper and consumption levels rise: “As I have a three-litre car, I can drive it a bit more.” 16

  17. Economic limits • Growth rates (GDP growth in %) in Germany have been falling since the economic miracle of the ‘60s • With yearly economic growth of 3%, it takes around 23.5 years for GDP to double • From a purely economic perspective, it is doubtful whether GDP can continue to grow in this manner 17

  18. What economic growth promises... • Lower unemployment • Less poverty in both North and South • Financing for social security systems (health, pensions, etc.) and consolidation of national budgets • Social harmony and stable democracy • Protection of the environment resulting from continued technological innovation and investment in environmental protection measures • Well-being and quality of life 18

  19. ... and what it delivers ... 19

  20. Lower unemployment • Between 1991 and 2006, GDP (adjusted for inflation) in Germany grew by 20%. In the same period, unemployment levels rose by 56%. The reason: productivity gains. • productivity gains: increased output (goods) per input unit (working hours) as a result of more efficient work processes, technological advances, etc. • In order to reduce unemployment, the growth rate would have to be greater than the productivity gains, which has not been the case in recent years . 20

  21. Economic growth as a weapon against poverty • Trickle-down effect: the prosperity achieved by the wealthier classes as a result of economic growth trickles down to the poorer segments of society. However, the data refutes this effect. • 2006: for every 100 US$ of growth in global GDP, just 1.30 US$ contributed to lifting those in absolute poverty above the poverty threshold, and only 2.80 US$ went towards increasing the income of those in relative poverty. 95.90 US$ went to the non-poor. • Growth as a central strategy against poverty is therefore highly inefficient. 21

  22. Financing for social security systems • There is a direct relationship between social security systems (pension funds, health and care insurance, unemployment insurance) and jobs. • High unemployment leads to insufficient contributions being paid into the social security system. • However, growth does not necessarily guarantee jobs. • We need other sources of financing for social security systems.

  23. Economic growth brings happiness • Life satisfaction is influenced by many different factors: social environment, job security, economic circumstances, health... • In the last 30 years, GDP has tripled in Germany, while life satisfaction has remained constant over the same period. • Reasons: - GDP growth does not necessarily mean higher individual income - Income is only partly responsible for life satisfaction - Satisfaction is also dependent on relative income levels within the individual’s reference group (same age, level of education, etc.) • Therefore, economic growth does not necessarily mean greater well-being in the sense of happiness. 23

  24. GDP and satisfaction Economic growth and life satisfaction in Germany - rising material prosperity does not mean greater life satisfaction. Black line: per capita GDP; grey line: life satisfaction. Source: Zukunftsfähiges Deutschland in einer globalisierten Welt 24

  25. Is sustainable growth possible? • The idea of sustainable growth: technological progress enables continued economic growth within the ecological limits of the planet. • Strategies: efficiency & consistency • Green New Deal: massive investment in renewable energies and other green technologies • However: decoupling problem (rising GDP in conjunction with falling resource consumption and emissions) remains → doubtful whether sustainable growth is possible 25

  26. Outlook • De-Growth/Décroissance movement (Serge Latouche and others); strategy: economic downscaling & sufficiency • Buen Vivir - “Good living”: enshrined as a social objective in the constitutions of Ecuador and Bolivia • Steady State Economy (Herman Daly): empirical link with ongoing crises 26

  27. Contact FairBindung e.V. c/o Thinkfarm Oranienstraße 183 10999 Berlin info@fairbindung.org Konzeptwerk Neue Ökonomie e.V. Klingenstr. 22 04229 Leipzig info@knoe.org www.endlich-wachstum.de

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