Greta Thunberg was Wrong about Economic Growth

In a speech, Greta Thunberg stated: “all you can talk about is money and fairy tales of eternal economic growth”.

This statement shows that Greta:

• Does not know the fate of past predictions of global calamity
• Is unaware of the changes in the advanced economies as they transition from industrial economies to service economies
• Does not understand the power of technical innovation
• Is indifferent to the plight of billions who would be trapped in poverty without economic growth.

At the end, I shall suggest what the true limits to economic growth are.

PAST PREDICTIONS OF GLOBAL CALAMITY

There have been numerous predictions of economic disaster:

• “Luddites” destroying machines which they believed would people out of

  

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The Luddites were a secret society active in England from1811 to 1817. They took their name from a (legendary?) character called Ned Ludd, who destroyed two stocking frames in 1779. The Luddites smashed machines, mainly in the textile industry in the belief that these were destroying jobs. They were suppressed by the government, with harsh measures such as deportation and execution. The link between technical innovation and employment is still controversial.

• Malthus (1766-1834) showed that mass starvation was inevitable.

He argued that since population growth is exponential, while the rise in food production is linear, at some time, there will not be enough food to sustain the population. The population would have to be limited by war, disease and decreased reproduction.

Improvements in agriculture, in particular the “green revolution” have allowed food production to soar. Population increase is also slowing around the world, proving Malthus wrong.

• Karl Marx predicted that violent revolution was inevitable. Arguing that the conditions of the working classes were reduced to subsistence levels until there would be widespread poverty and hunger. This would inevitably lead to the working classes (the “proletariat”) to rebel against the owners of the means of production (the “capitalists”). This would lead to socialism (where the means of production were owned by the state) and ultimately to communism (means of production owned by the workers).

Eduard Bernier, a German socialist, and others noticed that this was not happening in Germany and the conditions of the working classes were improving. There also a growth in the middle class, mainly recruited from the working classes. This was the start of social democracy (not the same as Democratic Socialism).

Clearly, Marx’s analysis was wrong and so were his predictions.

• In “The Population Bomb”, Stanford Professor Paul Erlich in 1968 predicted that there would be mass starvation by the late 1970’s. Clearly this was wrong. In a later edition, the time was modified to the late 1980’s. In the book he advocated extreme measures to halt population growth.

Even by 2009, although admitting that his predicted dates for calamity were wrong, he still insisted that the basic premise was correct and that he had done a service by alerting people to environmental and humanitarian risks. Nevertheless, his analysis and predictions were incorrect.

• The “Club of Rome” was founded in 1968 and consisted of 100 past and present heads of state, UN administrators, high-level politicians and government officials, diplomats, scientists, economists, and business leaders from around the globe. Some notable members include Joseph Stiglitz, Mikhail Gorbachev, Pierre Trudeau and Vaclav Havel.

In 1972, it issued a report “The Limits to Growth”. In this, the results of computer simulations were presented which showed that economic growth would be limited the depletion of natural resources. The oil crisis of 1973 seemed to support this view.

Critics of the report (and subsequent reports) such as Robert Solow, mathematicians Vermeulen and De Jongh and an interdisciplinary team at Sussex University’s Science Policy Research showed that the results were very sensitive to small changes in parameters and that the authors made unduly pessimistic assumptions.

• A website “Extinction Countdown Clock” lists environmental predictions. Where the predicted date of an event was passed, it lists whether the prediction came true or not. If the date had not been reached yet, the prediction sis listed as “Not Yet”. A sample of the predictions is shown below.

Date & Source	Claim	Doomsday Date	Successful Prediction
08-Jan-20	Climate will ‘reshape global, national and local politics’, claims former Australian MP, Wayne Swann (Labor).	08-Jan-25	Not yet.
	From Twitter, quote: “In the next five to ten years climate is going to completely reshape global, national and local politics […] Deniers in the Coalition think they are arguing with Labor about climate. They are arguing with an even more formidable foe: the laws of physics.”.
21-Jun-18	Climate change will wipe out all of humanity says Greta Thunberg®.	21-Jun-23	No.
	From Twitter, quote: “A top climate scientist is warning that climate change will wipe out all of humanity unless we stop using fossil fuels over the next five years.”
	Related: The now deleted article that Thunberg referenced, quoting James Anderson (Harvard).
18-Apr-03	Crash course towards massive species extinction, says Defenders of Wildlife.	18-Apr-23	No.
	Nina Fascione, Vice President for Field Conservation Programs at Defenders of Wildlife, quote: “Frankly, it looks like we’re on a crash course towards massive species extinctions in the next 20 years […] We could lose one-fifth or 20% of our species within the next two decades. That’s a very short amount of time”.
09-Jul-71	U.S. Scientist Sees New Ice Age Coming.	31-Jul-21	No.
	From The Washington Post, quote: “The world could be as little as 50 or 60 years away from a disastrous new ice age, a leading atmospheric scientist predicts. […] ‘In the next 50 years,’ the fine dust man constantly puts into the atmosphere by fossil fuel-burning could screen out so much sunlight that the average temperature could drop by six degrees”.
24-Jul-19	18 months to take action, says Prince Charles.	24-Jan-21	No.
	From the BBC, quote: “‘I am firmly of the view that the next 18 months will decide our ability to keep climate change to survivable levels and to restore nature to the equilibrium we need for our survival,’ said Prince Charles, speaking at a reception for Commonwealth foreign ministers recently”.

 

As of May 2023, there are 77 predictions included. Of these, the dates of 50 have been reached. ALL 50 PREDICTIONS HAVE NOT BEEN CORRECT.

This raises the question: why do the media, academia and political leaders still take environmental predictions seriously?

Consider a scenario which may be more familiar:

Your great-aunt Mildred has passed away in Red River, Saskatchewan. To your surprise, she has left you $1,000,000 in her will. You go to a financial advisor:

“Mr. Smith, I’m glad that you have come to us. If you place your money with us, we are predicting a 10% rate of return, which is significantly better than the stock exchange rate which we predict to be 5% next year.”

“How did you do last year?” you ask.

“Well last year was very difficult for the markets and the stock market only rose 4%.”

“How well did your funds do?”

“As I said it was a very difficult year for investments.”

“So what was your rate of return?”

“I’m afraid it was only 2%”

“What was your prediction for the previous year?

“12%”

Further investigation shows the same pattern: high returns predicted, actual results below stock market indices.

Would anyone invest with this financial advisor? Of course not.

The environmental predictors have been labelled “Teflon pundits” – even when their predictions are wrong, their reputations are intact and they make more predictions.

TRANSITION FROM INDUSTRIAL ECONOMIES TO SERVICE ECONOMIES

As countries economies grow, there is a transition to a service based economy. One of the results of this is that the economy still grows, but the consumption of materials decreases.

A good illustration of this is in the list of the world’s largest companies, by capitalisation (data from smallbusinessconnections.com.au).

In 1980, the list was dominated by oil producers and car manufacturers:

Rank	Company	Industry	Market cap (billion USD)	Market cap (inflation adj.)
1	IBM	Technology	$34.60	$128.12
2	AT&T	Telecommunications	$33.40	$123.68
3	Exxon	Oil & Gas	$32.90	$121.83
4	Standard Oil	Oil & Gas	$20.50	$75.91
5	Shell	Oil & Gas	$19.70	$72.95
6	Mobil	Oil & Gas	$19.20	$71.10
7	General Motors	Automotive	$18.90	$69.99
8	Texaco	Oil & Gas	$18.80	$69.62
9	DuPont	Chemicals	$16.10	$59.62
10	Gulf Oil	Oil & Gas	$15.10	$55.92

 

In 2023, the list is dominated by software companies:

Rank	Company	Industry	Market cap (billion USD)
1	Apple	Technology	$3,030.00
2	Microsoft	Technology	$2,510.00
3	Saudi Aramco	Oil & Gas	$2,080.00
4	Alphabet (Google)	Technology	$1,520.00
5	Amazon	Technology/Retail	$1,340.00
6	NVIDIA	Technology	$1,050.00
7	Tesla	Automotive	$886.89
8	Berkshire Hathaway	Diversified	$753.13
9	Meta (Facebook)	Technology	$733.11
10	Taiwan Semiconductor Manufacturing	Technology	$534.00

 

The highlighted companies provide assorted services. Apple does produce iPhones and iPads, but these involve very little materials and most of their revenue is from “apps” and streaming services.

Even where goods are concerned, in the developed countries material consumption reaches a “saturation” level.

For example, when I was growing up, we would have a bottle of Spanish Sauternes for Christmas. As I grew up and the family became more affluent wine drinking became more frequent. However, there came a point when instead of buying more wine, the quality went up. From $12 a bottle to $24 a bottle (and more for special occasions). Thus the amount of consumption did not go up, but the contribution to GDP grew.

A similar situation occurred with vehicles. My first car was a 10-year old Datsun 610 station wagon. This was replaced by newer models and then a second car. When there was one car per adult additional cars were not added, but the quality (and cost) increased. So a Toyota was replaced by a Mercedes and a Honda by a BMW. Again, the consumption of materials did not increase, but the contribution to GDP grew.

THE POWER OF TECHNICAL INNOVATION

The one issue all of the predictors of doom fail to take into account is technical innovation. It is impossible to predict an innovation until it actually happens. Flying cars were predicted for 2019 in the original Blade Runner movie, but no one predicted PC’s, laptops or cell phones.

It is only in retrospect that we can see the results of innovation.

Erlich’s predictions of mass starvation were rendered useless due to advances in agriculture. The “green revolution”, genetic modification of crops (GM), the increased use of artificial fertilisers all contributed to the situation today where there is ample supply of food except in cases of conflict or natural disasters, which are temporary.

The same is seen in oil production. King Hubbert, an American geophysicist, predicted in 1956 that the production of oil would reach a peak and then decline. In school, I remember our science teacher telling the class in 1963 that oil would run out in 20 years time. Since then this number seems to be constant. However oil production has not been declining.

One reason is the discovery of new oil regions – North Sea, Kazakhstan, Nigeria and others.

New technologies also enabled previously unreachable oil to be produced: offshore drilling and production, oil sands mining, horizontal well drilling and multiple fracture stimulation of horizontal wells (“fracking”).

“Enhanced Oil Recovery” methods, which increase the production of oil by injecting fluids into the oil reservoir have been developed: waterflooding; miscible gas injection using one of natural gas, enriched natural gas, nitrogen, carbon dioxide; polymer flooding, alkali-surfactant-polymer flooding; steam flooding; cyclic steam stimulation; in-situ combustion, steam-assisted gravity drainage (SAGD).

SAGD has enabled Canada to produce the viscous oil from the oil sands. It is now the 4^th largest oil producer in the world.

INDIFFERENCE TO THE PLIGHT OF BILLIONS OF POOR PEOPLE

Greta’s opposition to growth displays an indifference to the plight of billions who would be trapped in poverty without economic growth.

Greta’s message seems to be that to save the planet, economic growth must be halted.

If her message is intended only for the “rich” countries (this itself eliminates the obscenely rich countries of the Middle East) then the goal of saving the planet cannot be reached.

As pointed out earlier, growth in the “rich” countries is getting decoupled from growth in the consumption of materials, including fossil fuels.

This however is not the case with the under-developed countries. Taking the world as a whole, 648 million, or 8% of the population is chronically poor, defined as an income of less that $2.15/day, which is the International definition of extreme poverty as set by the World Bank and the UN. A further 47% live on less than $6.85/day (2017 data from Worldbank.org/en/topic/poverty/overview).

The only way to reduce poverty is through economic growth. Thus halting growth in effect condemns billions of people to crushing poverty. This is not only cruel but immoral.

WHAT ARE THE TRUE LIMITS ON ECONOMIC GROWTH?

Economic growth is only limited by the limits of imagination and innovation. This seems like a trite statement but is fundamentally true. It does however imply that there has to be freedom to pursue these and not be restricted by any external governmental force or societal dogma.