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Rediff.com  » Business » Limits to growth and how to overcome them

Limits to growth and how to overcome them

April 13, 2012 10:45 IST
We as a species are hitting global constraints imposed by Earth's ecological and bio-systems that we don't know how to mitigate or resolve as a species, says Sonali Ranade

A vast majority of us assume there is no limit to our growth as a species in terms of size, economics, and culture. There is no limit to human ingenuity that we know of. Every generation of Malthusian economist since the original himself has been proved wrong. 

Our culture, of which science and technology are an integral part, has found solutions to a vast variety of problems that could have finished off a less intelligent species long ago.  Techniques of production, problems of attacks by other species on our wellbeing, finding resources to feed, house and clothe increasing numbers have all yielded to our quest for knowledge and the innovations it brings. In the process we have created a society where our survival depends less on the DNA we inherit than on the acculturation we receive through education in our formative years.

The world in which we live and work is increasingly self-created by our species as opposed to one given us by nature. Indeed, individuals not adequately plugged into this self-created environment have very little chance of survival and growth. The means by which we plug individuals, or families, into the world we have created is money. Money is the system's lifeblood that delivers sustenance and rewards performance. It intermediates almost all our dealings with the rest of the world. 

Indeed, to have no money, or a means of claiming some from others around us, is to die. The life scripts that come to us speak of rights, duties, moral obligations and a variety of other notions that have little meaning unless backed up by money. How money is earned, and who gets how much of it for what, is the key political question asked of economics or culture since we invented the idea of money. Both capitalism and communism have sought to answer that question from differing perspectives in their respective domains of validity.

Capitalism focuses on the processes by which we create value that eventually translates into money for everybody. Wisely, capitalism doesn't take either innovation or entrepreneurial talent for granted nor does it pretend to know how it happens in individuals randomly dispersed in societies. Yet, all value at the margin is created by innovation, our uniquely human gift to apply past knowledge to solve current problems and to create new knowledge itself.

Not all innovation survives. What capitalism tries to ensure is that free and open markets provide the best opportunity to any innovation to attract capital, labour and other resources to create incremental value for all. In the process of doing so, almost incidentally as it were, capitalism also resolves issues related to how the incremental value created should be distributed. This value distribution is also determined by open and free markets that prices all resources. Any surplus left over goes to the innovator who created the means to further that innovation.

Communism takes innovation as given. It starts with a static world in which all people are equal and equally endowed. Therefore, there is no need to prefer one individual over the other. In this view, all capital is saved labour, since labour is all that we are capable of for creating value. Anybody who has a few proprietary rights over saved labour, through capture of one sort or the other, that is to say capital, tries to extract rent from labour for its use. 

This gives rise to social tensions between labour and capital who then play a zero sum game where one's gains come at the expense of the other. Since capital has the upper hand to begin with, absent a social revolution, rent to capital adds to capital until one fine day capital has all the money or capital; and labour has none which leads to a collapse of the system itself. Point to note is, communism totally ignores the value of innovation and the special effort society needs to make to find innovators and encourage them.

So who is going to solve the problems that we face as a species? Let us just take three. First, consider global warming that the right, so-called undisputed champions of capitalism deny is a problem at all despite all the evidence that continues to accumulate.  Who is going to resolve the problem?  Second, let's talk shortage of fresh water. The earth as a whole produces only a given amount of fresh water annually that is limited by the solar energy that earth receives on its surface. At seven billion we are already way behind the fresh water we need. As we approach nine billion the problem will become unmanageable. 

Worse, water shortage feeds into the problem of global warming. South east Asia, comprising Pakistan, India, Bangladesh and China, will constitute 30 per cent of the world's population but have only 12 pc of the world's supply of fresh water. Further more, due to global warming, food production in this area will fall by as much as 50 pc due to warming and desertification by 2060. How is one-third of humanity going to be fed with less than 10 pc of the world's food? 

Lastly, let's consider energy. Fossil fuel production, oil and coal, has in all probability already peaked. How are we going to meet the shortfalls in future? 

Note these not problems of one local society, culture, country or system. We as a species are hitting global constraints imposed by Earth's ecological and bio-systems that we don't know how to mitigate or resolve as a species. What's more challenging is that solutions to these problems, if any exist, will be global across many different cultures, religions, societies, countries and systems. We have never faced problems of such humongous complexities before. Should we thrown in the towel, as Malthusian communists would advocate? 

If you are a communist, the answers to the emerging problems are profoundly different from those that one would look for under capitalism. Communists would consider putting an absolute ceiling on population numbers. One child per couple or you are unplugged from the system. A global police State to enforce the rule would be absolutely necessary.  A war on those opposed to the rule or dissenters would be mandatory and would help whittle down numbers further. Scarce resources would be rationed out per capita.  Incentives for innovation would fall off dramatically. Faith in the future of the species would give way to despair. Exceptions to rationing, restrictions on liberties for the privileged would be eased. Gifted individuals have to be tracked down the hard way and put in special schools with special privileges to find solutions to the problems we have outlined. After an era of absolute darkness, communism itself would be dismantled, having decimated a generation or two of the species and we would be back into capitalism once again. If capitalism is cyclic, the bad cycles span years not generations.

Does capitalism have unique solutions to emerging problems that are better than those offered by communism? The answer has to be a resounding no. But what capitalism offers is hope that Malthus would have considered foolhardy given the tyranny of geometrical growth over arithmetical progression. Capitalism guarantees that if there are viable ideas to resolve these emerging global problems then it is best placed to not only find them but also put them into practice. And it does so, not by putting a totalitarian or fascist all-knowing omniscient government at the top, but by working through everyday democracy. 

To my mind that is the crucial difference between the two systems. One views the species positively and has inherent faith in its ability to learn and resolve problems compassionately. The other treats the large mass of general population as untrustworthy, selfish brutes who will behave correctly only when effectively policed. In fact, communism creates the very elites it insists do not exist when faced with the need to resolve problems!

It is not the time for despair or even panic. Nevertheless, we have to explicitly recognise that education is the means by which we have always trained and equipped people to live in an environment that we have created for ourselves. The Anthropocene bubble that we live in is not one that Mother Nature equips us to live in through our DNA. It is of our own creation and the only way of making it work is by our own ideas and our own culture. Education of the young is what keeps it going. Absent the acculturation that education offers, our bubble would collapse as if pricked.

The sad thing is in the crucial neighbourhood that we live, education's true purpose has neither been understood nor the resources necessary to impart it have been found. This is a dreadful weakness that we must address on a war footing. Education is then the only factor limiting our growth.

Sonali Ranade is a trader in international markets

Sonali Ranade