The dark side of economic growth

Economic growth is a recent historical phenomenon. In 1776 when Adam Smith published “An Inquiry into the Nature and Causes of the Wealth of Nations” 75% of humanity lived on less than a dollar a day and the average per capita income was about US$ $550 – an income level that was stagnant for 2,000 years.

However, since the Industrial Revolution, economic development has reached unprecedented levels. Economic growth, however unequal, has benefited a significant portion of humankind, multiplying per capita income by a factor of 11 to an average of US$ 6,500 and lifting more than 80% of the world’s population over the US$1 a day threshold.

This pace of development has also resulted in an extraordinary demographic expansion, increasing the globe’s population sevenfold, from less than 1 billion inhabitants in the 1800s to 7 billion today, and expecting to reach almost 9 billion by 2050. Also, population growth has been matched by a significant decrease in mortality rates and a rise in life expectancy. In the year 1000, the average infant could expect to live about 24 years. A third died in the first year of life and hunger and epidemic disease ravaged the survivors. By 1820, life expectancy had risen to 36 years in the West, with only marginal improvement elsewhere. Today, a person can expect to live to 76 in the West and to 67 in the rest of the world.

Thus, as humankind; we are now richer and living longer than ever before.

The western social and economic development model which has evolved since the Industrial Revolution has driven these results and has become an aspiration of governments in the developed world and in emerging markets. The American dream of wealth and consumption has become a global dream.

Nevertheless, there is a dark side to this development story, one that should concern us all. However positive this economic growth aspiration may sound, the latest scientific data reveals that human consumption has fast outpaced the Earth’s capacity to regenerate. We have grown faster than what our planet can sustain.

The latest estimates by the WBCSD and the Global Footprint Network indicate that the Earth’s capacity has been overshot since the 1980s and that we now consume at a rate of 1.5 planets or the equivalent to 50% more per year than what the Earth can regenerate in that period. The medium-term trend also looks worrying and they predict that by 2050 we will be consuming at a ratio of 2.3 planets.

Our unsustainable rate of consumption of the Earth’s resources has already significantly impaired many of our ecosystems and we now know that some of them are lost for good and many others are on the point of extinction. We also know that the human footprint has a direct impact on the level of greenhouse gases in the atmosphere, in climate change, the acidification of the oceans and severe depletion of fisheries, water scarcity and the progressive deforestation and relentless reduction of biodiversity

These trends are all the more disturbing given that it is now evident that the level of resources required to replicate the West´s consumption model for the majority of the world would be so great that the planet would not be able to sustain it.

Some estimates indicate that it would take as many as an additional four planets to procure the required resources consumed and wasted today per capita in the developed world if the same levels of consumption were to be adopted by the emerging economies.

As the developing societies grow, a monumental challenge is exposed. Clearly we have a duty to lift a majority of humankind out of poverty and we must continue our path towards development. However, we must do so in innovative ways. We cannot follow the same path that took us where we are today. We must realize the limits of our planet and innovate within those constraints. We have much of the technology and human capital to figure out the way, but the clock is ticking and time is running out.

Author: Leo Schlesinger  is the CEO of MASISA México, an integrated sustainable forestry, chemicals, composite boards and furniture solutions retail leader.  He has an MBA from London Business School and is also a member of various Non Executive Boards of for profit and non profit organizations. He is a 2010 WEF Young Global Leader and Chairs the Global Agenda Council on Natural Resources and Biodiversity. He was also awarded in 2012 the CEO of the year SEN award by the Young Presidents Organization.

Photo Credit: Reuters Pictures