Fifty years ago the Limits to Growth report started a debate that pitted environmentalists against economists — and the economists won. Richard McNeill Douglas investigates why and what comes next.
The 28th annual UN climate change conference kicked off on 30 November, with delegates from nearly 200 countries gathering in Dubai for two weeks of debate. One of their main jobs was taking stock of their collective efforts to cut greenhouse gas emissions in line with the pledge they made in 2015: to give the world a decent chance of limiting global warming to 1.5ºC.
In truth, the verdict was known well before the conference began. The remaining carbon budget — the total amount of carbon we can afford to emit into the atmosphere and still hope to limit global warming to 1.5ºC — is now tiny: at current levels of emissions it would be all used up in just six years. A UN report published in September commented: “There is a rapidly closing window of opportunity to secure a livable and sustainable future for all.”
It didn’t have to be this way. Fifty years ago there was a true turning point in human history. Through the 1950s and 60s the affluent countries of what used to be called the First World experienced an unprecedented rise in material living standards. But underlying this economic growth was a rise in pollution and extraction on such a scale it has been described as the Great Acceleration.
A turning point had been reached. Surely, many thought, politicians would act on these concerns and begin the transition towards long-term environmental sustainability.
In response, a rising environmental consciousness – driven by books such as Rachel Carson’s Silent Spring – began to raise fundamental questions about this use and abuse of nature. By 1972, with the Club of Rome’s Limits to Growth report and the UN Stockholm Conference on the environment, these concerns had reached a new level of clarity and influence. A turning point had been reached. Surely, many thought, politicians would act on these concerns and begin the transition towards long-term environmental sustainability.
But politicians did not act in this way. And that’s why, fifty years later, we have so much less room for manoeuvre. In 1972 the global population was 3.8 billion, while the atmospheric concentration of carbon dioxide had reached 327 parts per million. In 2022 these figures had reached 8 billion people and 419 ppm respectively. Recently scientists have adjudged six of nine critical planetary boundaries to have been transgressed.
How did we get here? What happened fifty years ago to block that dawning eco-consciousness from achieving real political change?
Economists happened. Economics happened.
The Counter movement
Sociologists point to something they call the “environmental counter-movement”. This was well funded by big polluters and wealthy opponents of government regulation such as the Koch brothers, and grew in the early 1970s in opposition to the green movement. In the US especially, it has created a mutually-reinforcing network of right-wing think tanks that contest the work of scientists and demand media airtime to provide “balance”.
The money flowing through this countermovement has been well-documented, and its economic self-motivations are obvious. But not enough attention has been paid to its intellectual leadership. When we examine it, we find that the political opposition to environmentalism over the past fifty years has been conducted in the language of economics. And in fact, it’s precisely the economic arguments against environmentalism that have helped economics to take over politics in this period, transforming democracy into something resembling econocracy.
The world can get along without natural resources
We can tell this story through the examples of three economists, each of whom helped to shape an emerging intellectual and ultimately political opposition to environmentalism in the early 1970s. Let’s start with a Nobel laureate and one of the most decorated economists of the second half of the twentieth century, Robert Solow. Giving the American Economic Association’s annual lecture in 1974, Solow set out to meet the challenge issued by the Limits to Growth report two years previously.
Solow’s approach depended on an abstract model of the economy, in which non-renewable natural resources were one input into economic production alongside others, including industrial capacity such as machinery. Everything, he then concluded, turned on the degree to which non-renewable resources could be substituted by other inputs. In a turn of phrase that has become infamous he explained: “If it is very easy to substitute other factors for natural resources, then there is in principle no problem. The world can, in effect, get along without natural resources.” While, in practice, Solow presented this as an unlikely possibility, the more realistic case he offered was hardly very different: the principle of substitutability, he suggested, gave us the potential to evade natural limits indefinitely.
Solow’s role in this story stands out in the sense that he was not part of a concerted anti-environmental counter-movement. Having addressed the issue of natural limits when this was topical, he was largely unpreoccupied by it again. But this is just it: his intervention, and that of other mainstream economists, such as Joseph Stiglitz, helped to establish the impression in political debate that the limits to growth question had been addressed. The grown ups of economic theory had resolved the matter. Nothing to see here.
This sense that the counter-movement has had the intellectual establishment of economists on its side has been immensely important to its polemical footsoldiers.
We will never run out of anything
This sense that the counter-movement has had the intellectual establishment of economists on its side has been immensely important to its polemical footsoldiers. But there have also been some professional economists among their number, one of whom is worth focusing on in particular. Wilfred Beckerman, a respected welfare economist, was one of the most prominent early critics of the Limits to Growth, and his economic writings helped to establish one of the key arguments of the countermovement: that the market can take care of environmental problems by itself. As he put it, if we begin to run short of one resource, its price would go up, meaning businesses would naturally switch to another resource — and thus “we will never run out of anything at all”.
The influence of Hayek
The third economist in this story combines prestige and polemics. Prior to the early 1970s Friedrich von Hayek had spent decades doing academic labour in relative obscurity; his free-market neoliberalism was out of fashion with the prevailing economics of post war Keynesianism. But in 1974 he won the Nobel prize for economics, and everything began to change. Hayek devoted part of his acceptance speech to a sideswipe at the Limits to Growth report, citing Beckerman’s critique — a sign of things to come.
Hayek’s economics were taken up, in an explicitly anti-environmentalist direction by the polemicist Julian Simon — with Hayek being sufficiently impressed that he took the unprecedented step of writing Simon a fan letter. Simon, in turn, became a godfather of the-counter-movement. Influential in Reagan’s White House, Simon continues to inspire a more recent generation of activists—notably, Bjørn Lomborg, the self-styled “skeptical environmentalist”.
The rise of neoliberalism, from academic sect to political triumph with the elections of Thatcher and Reagan, is a well-worn story. But there is an element that gains rather less attention: that it was the challenge posed by environmentalism in the early 1970s that helped neoliberals make their breakthrough. It was their very fundamentalist defence of markets, and of economics as the master key to unlock all problems, which established neoliberals such as Hayek as the champions of capitalist growth in its hour of need. Anti-environmentalism was baked into this movement from the start. Its triumph was symbolised in Reagan’s second inaugural address, in which he told his fellow Americans outright: “There are no limits to growth”.
For decades governments around the world have been conditioned into creating pseudo-markets in all kinds of policy areas — justice, education, healthcare, climate change to give a few examples.
And as its critics have remarked, it’s with the political ascent of neoliberalism that economics really expands beyond its disciplinary boundaries. For decades governments around the world have been conditioned into creating pseudo-markets in all kinds of policy areas — justice, education, healthcare, climate change to give a few examples. The problem is that the underlying economics on which this was based depended on a dogmatic application of abstract models, with only a tenuous relationship with the real world. The lunatics-taken-over-the-asylum feel to much of political life under neoliberalism has its roots in the influential argument put forward by Milton Friedman that economic models don’t need to be compatible with common sense.
Economics for the sane
This disconnect with reality was pithily pinpointed in a famous quote, attributed to the pioneering ecological economist, Kenneth Boulding: “Anyone who believes exponential growth can go on forever on a finite planet is either a madman or an economist.” It’s exactly here, in the economists’ attack on the idea of environmental limits, that the madness of their preference for abstract models over reality is most clearly exposed. And it’s precisely this defence of abstract purity in the form of never-ending growth that has enabled economics to take over politics.
Where are our grounds for hope? We can gain some, first of all, from the observation that the wind at last is going out of the sails of neoliberalism; the financial crash of 2008 diminished its aura, while the Covid pandemic helped to restore the prestige of direct intervention by the state. Joe Biden’s ambitious Inflation Reduction Act may be an early sign of this legacy.
Beyond this there is hope for economics itself. That quip of Boulding’s tells us that much. Since Boulding was himself an economist, his criticism clearly does not apply to all economists. Those to whom this does not apply are the ones who build fundamental limits to growth into their models — or in other words the ecological economists. If it’s not yet time for this group to achieve decisive political influence, then it soon will be.