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The End Of Economic Growth?

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An oil change for the world


From Saturday's Globe and Mail


Friday, May. 25, 2012 4:00PM EDT

Economic books with apocalyptic-sounding titles are always surefire hits. What is it about human nature that attracts us to tomes about impending financial collapse or dire living conditions? Jeff Rubin’s The End of Growth is yet another with an alarming-sounding title. Yet where it departs from others of its ilk is in its much more hopeful conclusion.

You have to hand it to Rubin: For a former bank economist, he writes in a way that is amazingly accessible for those not steeped in the language of the dismal science, which he demonstrated in his previous book, the bestselling Why Your World Is About to Get a Whole Lot Smaller. In The End of Growth, he pins his argument on one central premise: The rising price of oil means economic growth in the industrialized world will halt – and probably contract – in the years ahead.

Rubin admits that he is “continually intrigued by people’s instinctive capacity to adapt to changing economic circumstances.” Still, he suggests that the industrialized countries will have difficulty managing expensive oil and the implied economic hardship that will ensue. On one hand, he is optimistic that people can adjust, but on the other, he seems to conclude that the adjustment will prove challenging.

The book is well researched and logically written, and there is not much with which to take issue. But where The End of Growth falls a bit short is in what it does not mention. There are at least three major themes on which Rubin is oddly silent.

One is the impact of an aging population on slowing growth. This is especially apparent in Japan and western Europe, where the overall population will soon start to shrink. A smaller population will also cause the economy as measured by the gross domestic product to contract – but with fewer people, living standards need not be sacrificed. (The more significant problem is not with a smaller economy per se, but with a smaller tax base to support public health care and education. But that’s a problem for a different book.) Rubin is entirely correct that economic growth will be permanently slower in the decades ahead, but I’m not convinced expensive oil is the only factor.

The second is the presence of a major and obvious substitute for crude oil: natural gas. A much cleaner-burning fuel, natural gas has arguably not yet reached its full potential as an energy source for most of the world’s economy. And because it has become so plentiful, it’s dirt cheap compared with oil. I kept waiting for the chapter in which Rubin would finally talk about natural gas, perhaps convincing me why it will not (or cannot) adequately fill the void left by costly crude. But that chapter never came, and it left me wondering why.

Third, Rubin never discusses how changes in technology – the Internet, digital information, 3-D printing etc. – offer realistic opportunities to propel economic growth and curb oil consumption at the same time. He emphasizes throughout the book that reduced carbon will necessarily reduce economic growth. But consider this:

Twenty years ago, a book review such as this would involve a paper copy of a book mailed across the country. The reviewer would type on a very large and expensive computer constructed with a lot of plastic, metal and glass. It would have weighed 40 pounds, and would have been hauled across the Pacific on a diesel-fuelled container ship. The CPU “tower” would have had a fan in it to keep it cool. The reviewer may not have had such an elaborate piece of equipment at home, so he/she may have had to drive several kilometres to an office. The manuscript would have been physically printed on paper, placed in an envelope, and shipped back across the country to the editor.

In 2012, this book review was written on a tablet that weights 1.34 pounds. It uses hardly any electricity. I wrote it on the rooftop garden of my high-density downtown Calgary condo (ironically, looking out at the towers of EnCana, Husky Oil, Shell and Suncor). I walk across the street for a cup of coffee. And I e-mail it back to the newspaper. In other words, I’m producing as much as would have been produced 20 years ago, but with a small fraction of the oil, electricity, metal, glass, copper wire and plastic as before. It is possible to produce more with less carbon.

Rubin is entirely correct, however, in suggesting that change is inevitable. More of us will have to accept less travel, more locally sourced food, fewer toys and gadgets, and higher-density living. But all of this should be considered an improvement in our lives, as he points out.

Higher oil prices will mean change. But does that have to require slower economic growth and a less appealing standard of living for Canadians? Only for those who cannot – or will not – adapt.

Todd Hirsch is the Calgary-based senior economist at ATB Financial, and he teaches public finance at the University of Calgary. In February, he launched his first book, The Boiling Frog Dilemma: Saving Canada from Economic Decline.

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