The ear tags of our cows spell the end of growth
On the internal limits to growth
As a small scale, semi-luddite farmer, I was quite annoyed when a person from the authorities came to inspect the ear tags of our dozen of cows. He spent half a day for the job, including travel and reporting. I had to spend time and money to correct that four of our cows had a missing tag in one ear (they are supposed to have one in each ear). After completion, I had to take a photo of each of the cows with both ears visible and send to the county administration. “For God’s sake, I know my cows by name and have no need at all to assign them numbers” was my, quite natural, reaction for all that nonsense (my second reaction was that how easy it would be to make a fake ear tag photo...). But, perhaps, ear tags of cows is really essential for the works of the modern society.
Among those that believe there are limits to economic growth most attention is directed to the external factors that might constrain growth. And for sure, that is a very relevant aspect and one I have engaged a lot in. But there are also others that point towards internal factors. First among them, I believe, was Karl Marx that meant that falling profits, as a result of overaccumulation, would lead the collapse of capitalism (Marx wrote a lot over a long period of time and the totality of his writing is quite naturally open to various interpretations and the “law of the falling profit rate” is one of them). For 150 years, many of his followers have regularly exclaimed: ”it happens now” when a major crisis has emerged, some with the same persuasion as followers of a doomsday cult. It is true that profits tend to fall in mature markets, but so far capitalism has always managed to expand into earlier uncharted territories. First, as noted by Rosa Luxemburg, capitalism expanded into new areas, not only using other countries as suppliers of raw materials, but also as markets and later as producers of simpler products. Later on, capitalism expanded by including more and more aspects of human life in the market economy, the main vehicle for capitalist expansion. That was the real scope of the neo-liberal revolution of the 1980s with deregulation and privatization. Also the private sphere and civil society have increasingly been turned into markets. The last three decades, capitalism according to Deng, has managed to turn a billion Chinese into enthusiastic participants in the capitalist project, so admittedly, it has shown considerable vigour.
There are, of course, other tendencies and tensions within the system, such as increasing inequality. Let me turn my attention here to population and supply of labour. There is a lot of discussion about the rapid demographic changes. I wrote about it a few weeks ago, where my hypothesis was that “modernity”, which is the cultural face of capitalism (or perhaps capitalism is the economic face of modernity, also a topic for an essay!), is killing itself by a such a strong focus on the individual that people no longer want kids. Here I want to raise an economic perspective on that topic. Labour is clearly one of the most important aspects of the capitalist engine. Despite all machines invented, capitalism has always craved for labour, because, in the end, it is the value created in the labour process that creates value in an economic sense. It is apparent that demographic changes have a huge impact on the economy. Mostly this has been discussed in the term of the demographic dividend that appears in the phase of demographic transition and the subsequent demographic drag which appears when birth rates continues to fall and people live longer, leading to that the proportion of workers in the population declines and the elderly need a lot of care.
That is certainly a relevant perspective, but also something that we might want to dig a bit deeper in. A few years ago, Michele Manfroni and colleagues in Barcelona wrote an article in Ecological Economics with the somewhat boring but relevant title: The profile of time allocation in the metabolic patterns of society: An internal biophysical limit to economic growth. In that article they show how little of the available time in the EU that is allocated to paid work and how little of that in turn that is allocated to the direct production of goods. Of the annually available time of 8,760 hours per capita (all people regardless of age or employment), 680 is spent on paid work of which only 35 hours is spent on primary production (agriculture, mining, fishery and forest) and 145 on manufacturing and construction. The remaining 500 hours are spent on all kinds of “services”. Notably, services are often misunderstood as being mainly personal services such as haircuts, massage or training, but the majority of the services are internal services in the economy, distribution, financial services and all sorts of managerial jobs. Care and education represent the other big chunk.
“When most time is invested in services and final consumption rather than supplying the inputs required by the metabolic process, further growth is constrained.”One could of course, as anthropologist David Graeber did, see most of these jobs as totally meaningless “bullshit jobs”. Manfroni and colleagues discuss them in the perspective of ever increasing complexity. With this perspective, most of the services are essential for making the system work, to deal with all the complexities of modern value chains and the society associated with them. Controls and policies, schemes for quality assurance and certification, sustainability, equality, and diversity, all of them are in some regard equally necessary as the trucks driving the food to our stores. In this perspective, the eartagging of my cows can’t be seen as an isolated stupidity.*
Quite early in the development of capitalism, it was realized that a too harsh exploitation of the workers with long hours of work and lowest possible pay was, in the long run, harmful as there would be no market for all the stuff the new industries produced (in that sense Marx was really on to something). Europeans work less today, but that has also meant that their capacity for consumption of both goods and services have increased tremendously. This consumptive capacity is essential for the workings of the system and is an important driver of growth (mostly referred to as consumer spending). But now the system is imbalanced because the few work hours are not enough to satisfy the consumption side of the equation. The economic growth of European countries is also stagnating: “When most time is invested in services and final consumption rather than supplying the inputs required by the metabolic process, further growth is constrained.”
Come to rescue: 1) China, 2) migrants and 3) further automation. Manfroni and colleagues have calculated that the EU net imports 465 hours (import 566h, export 101h) of work per capita from global markets which means that almost 40% of all paid work that is needed to maintain the EU economy is done outside the EU (a lot of it in China). The use of migrants is also at play in the EU economy and I guess some of their work is not really included in the figures of the researchers as a considerable share of their work is informal/illegal.
Another perspective is also how this reality fits with the recurrent calls for a shorter work week that are prominent in many European countries. But I will come back to this at another time.
Clearly, there is no chance for global replication of the European model, as the pool of cheaper workers will disappear when more countries “reach” the economic development of the advanced economies.** Japan has a similar situation as the EU and the USA as well, but in the American case, the demographics are still more conducive for growth and Americans work a bit more than Europeans. If so, it means that the only rescue for global economic growth in the light of new demographics is even further automation and increase in productivity.
“AI is neither a promise or a threat but a necessity to manage an ever increasing complexity”Twenty years ago, it was assumed that the digitalization would boost productivity, but there is little evidence to that effect. The main effect on digitalization has been on the digital technologies and infrastructures themselves while the impact in the rest of the economy is small. Now, AI and autonomous systems are seen as the new saviours. While most of the discourse is about the possible promises or threats by autonomous systems, the more mundane fact is that AI is something that is desperately needed to deal with the complexities of the system and the increased flow of information caused by digitalization. This is corroborated by the fact that most applications of AI seem to be in the realm of controlling and managing complex systems and information flows, i.e. in the service sectors that constitute most of the economy and not in the primary or secondary production. If that is so, we should not expect that AI will be a tool to increase or even maintain economic growth, but rather an effort to keep the ship afloat, in a similar way as digitalization has been. There is also no reason to believe that it will fuel unemployment. In the end, it will not make much to “solve” the growth dilemma of the shortage of labour for continued growth. The fact that AI also requires a huge additional energy supply is clearly an additional problem.
Coming back to the main issue here: The combination of the changed societal metabolism and the demographic drag will most likely mean the end of growth, even without the prevailing resource constraints.
* I guess some of this is what team Trump/Musk is aiming at with the project to trim government bureaucracy, but my experience is that also the private sector is quite good at generating rules and policies, after all most of these services are in the private sector. So, I don’t expect too much “progress” from Mr. Musk.
** The double wager of Trump to both increase tariffs, deport immigrants and restrict immigration seems to be a very risky strategy from a capitalist point of view.
This gets at a debate I often have, are the limits to economic growth currently external in terms of resource depletion, or just a consequence of contradictions of capitalism? And I honestly think it's both. You see this in the US with a larger share of profit going to financial services, digital services and the managerial class not and primary production. This means that profits by and large aren't being invested in more assets to create more growth. The growing inequality also means less consumption capacity for workers.
But of course the real question from a sustainability perspective is why do we need growth? And the answer of course is so that capital can make a return... and we can't conceive of a system without capital return. (unless it's feudalism I suppose)
Corporate bureaucracy really could be it's own subject, but I think it does cut against the labor constraint argument. The managers who manage managers aren't really doing any work and their power comes at the expense of the people who actually have to do the job while fending off management.
Of course the good part about the garden is that all such distinctions between production, consumption, labor and just being alive can take a backseat for awhile.
In my own professional sphere of software engineering it has become increasingly easy to build systems of vast complexity to the point where not even their notional creators fully understand what they do. In turn the end users of enterprise systems in sectors like telecommunications face a harder and harder job wrangling these systems towards the ends they are notionally there to serve. Automation, or so-called "closed loop systems" - machines instructing other machines (by "AI" if you must) - is now the holy grail.
This aspect of ungovernable complexity seems pervasive now in every sphere of human activity; the annual budget over runs of the Irish Health Service have become a running national joke, while the service seems to get worse with each passing year. It seems to also be the root of the failure of liberal technocratic politics: unable to solve the problems of the modern world, messaging becomes the one thing remaining that can and must be controlled, which leads to cynicism and disillusionment in the body politic. This was skewered in the recent film "Rumours", where the G7 leaders gathered to agree the wording of a communiqué for some unspecified crisis find themselves mired in an increasingly absurd Beckettian limbo.
Meanwhile voters increasingly turn to politicians who offer them childishly simple explanations and make them feel less unmoored, at least for a while. But the underlying problems cannot be wished away.