Peak Oil and Economic Growth: Where Do We Go From Here?

Posted by CITIZEN POWER ALLIANCE at 7:43 AM

Oil and the economy are clearly and inextricably linked. Many analysts call oil the engine of economic growth. Certainly U.S. oil consumption patterns and economic output have experienced similar upward trends over the decades (see graph). It is difficult to find anything produced or consumed in the U.S. economy that doesn’t require oil as an input to its life cycle. It logically follows that changing oil prices or altering oil consumption patterns will affect economic growth. That’s why people (although probably not enough) worry about peak oil. They fear that the age of economic growth will come to an end.

The real issue, though, is whether economic growth is a desirable goal to begin with! Economic growth is simply an increase in the production and consumption of goods and services. It is driven by increasing population and increasing per capita consumption, and is typically indicated by increasing gross domestic product (GDP). Theory and evidence suggest that continued growth is actually “uneconomic” or costly to society . Ecological footprint analysis shows that the global economy is consuming 30 percent more resources than the Earth can regenerate each year , a deficit that cannot be maintained for long.

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1 comments:

  1. Anonymous said... 4/04/2008

    Great post! One of the biggest obstacles to people getting behind the idea that population growth must be stopped is the inability of economists to envision a healthy economy without never-ending population growth. Indeed, beyond some optimum population, further growth becomes cancerous and begins to erode our standard of living and quality of life. I agree with your premise, that the optimum population has already been breached.

    I should introduce myself. I am the author of a book titled "Five Short Blasts: A New Economic Theory Exposes The Fatal Flaw in Globalization and Its Consequences for America." To make a long story short, my theory is that as population density rises beyond some optimum level, per capita consumption of products begins to decline out of the need to conserve space. People who live in crowded conditions simply don’t have enough space to use and store many products. This declining per capita consumption, in the face of rising productivity (which always rises), inevitably yields rising unemployment and poverty.

    This theory has huge implications for U.S. policy toward population management, especially immigration policy. Our policies of encouraging high rates of immigration are rooted in the belief of economists that population growth is a good thing, fueling economic growth. Through most of human history, the interests of the common good and business (corporations) were both well-served by continuing population growth. For the common good, we needed more workers to man our factories, producing the goods needed for a high standard of living. This population growth translated into sales volume growth for corporations. Both were happy.

    But, once an optimum population density is breached, their interests diverge. It is in the interest of the common good to stabilize the population, avoiding an erosion of our quality of life through high unemployment and poverty. However, it is still in the interest of corporations to support further population growth because, even though per capita consumption goes into decline, total consumption still increases. We now find ourselves in the position of having corporations and economists influencing public policy in a direction that is not in the best interest of the common good.

    It's absolutely imperative that our population be stabilized, and that's impossible without dramatically reining in immigration, both legal and illegal.

    If you're interested in learning more about this new theory, I invite you to visit my web site at OpenWindowPublishingCo.com where you can read the preface for free, join in my blog discussion and, of course, purchase the book if you like. (It's also available at Amazon.com.) However, it appears that your blog has some substantial following. If you'd be willing to review my book, I'd be happy to send you a free copy. Just send me your shipping address.

    Please forgive the somewhat "spammish" nature of the previous paragraph. I just don't know how else to inject this new perspective into the population debate without drawing attention to the book that explains the theory.

    Keep up the good work on a great blog!

    Pete Murphy
    Author, Five Short Blasts

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