TreeHugger: In "The End of Growth," you say that the economic woes we are feeling now are not a slump or a phase, but the beginning of the end. Why do you see this so differently from those who say that it's just a tough spot we're going to pull out of?
Richard Heinberg: The reason is I'm looking at some structural factors that I think most economists are missing. They're seeing the problems in the financial economy: the overwhelming debt burden of the banks, the toxic assets they hold, and the overwhelming debt burden held by a number of countries, including Greece, Ireland, Portugal, and the US. And this is a huge problem, there's no question about it. It's the worst financial crisis since the 1930s.
However, if that's all that were going on, then we could dig our way out of it eventually. But it's not all that's going on. We have two basic, structural crises that underly that financial crisis. They are the depletion of energy resources and other nonrenewable resources on which our economy depends. And the accumulating environmental impacts from our industrial processes. These underlying structural problems are converging in real time to cut off the possibility of economic growth as we knew it over the past few decades.
That's a drag on the economy that's not customarily taken into account. When economists try to get the engine started again, with a Keynesian stimulus or with austerity measures, the engine just doesn't respond. No matter what we've done over the past few years, the best we've been able to do is to buy a few quarters of economic expansion, at the cost of enormous amounts of new debt on the part of governments.
I think we turned a fundamental corner here. And just as the world economy was a pretty much static affair century after century, up until the 20th century when we had so much rapid growth, we're seeing the economy go back to normal, in effect, which is a steady state rather than a consistently growing treadmill.
TH: Meaning stasis, which is different from the norm, which is constant expansion?
Heinberg: Yeah. We've gotten used to a normal that is actually extraordinary, and we take it for granted. We think that can go on forever. Nothing grows forever on a finite planet. Think of a newborn hamster. It doubles its weight every week for the first few weeks of its life. A tiny little thing. But suppose it continued doubling its weight for one whole year, 52 doublings. How big a hamster would we have? Well, we'd have a nine-billion-ton hamster at the end of a year.
Things in nature don't grow forever; they reach a certain size and then level off. But somehow we've gotten this idea that our economy is something that can continue to grow for century after century, that we can just continue to consume more and more.
But the fact is, we live on a planet with limited resources. And those environmental resource limits are starting to appear in real time. We're seeing it first with oil and other energy resources, but also minerals and metals, as well as fish in the ocean. And the result is that economic growth is stagnating.
TH: In "The End of Growth" you talk about how the financial crisis that all came to a head in 2008 is typically associated with practices in the housing market, but that what gets often ignored is the role that oil played. Can you draw that connection for those of us who don't associate the financial crisis with the price of oil?
Heinberg: Sure. Well, first of all, to be clear, there really was a house-price bubble in the 2000s, and the bursting of that bubble did precipitate the financial crash of 2008. But that's not the only thing that was going on. During the 2000s, we were also seeing a gradually, consistently increasing price of oil.
The world oil supply has not been growing since about 2005, even though the price has been rising and rising and rising. So, people are buying houses during the bubble years, and the price of houses is going up, so people have to buy houses further away from where they work. Well, that's where the crash starts; in the suburban neighborhoods, where people have long commutes and big SUVs with giant gas tanks. As the oil price goes up and up, to almost $150 a barrel in 2008, people have to spend over $100 to fill up their car gas tanks. That means they have less and less money to pay their mortgage bills or their credit cards.
It's in those suburban neighborhoods that the housing bubble begins to come apart. And then it spreads like wildfire through the rest of the economy, as the oil price hits its all-time peak of $147 in July 2008. And from that point on, it's just sheer contagion. The bubble bursts. The banks, AIG, Lehman Brothers, all come tumbling down. And the rest is history.
TH: You wrote a memo recently on the Post Carbon Institute website titled "End-of-Growth Uprising Goes Global." When it comes to what's going on with Occupy Wall Street and similar movements elsewhere, what is your reaction? How do you see these movements in the context of the end of economic expansion?
Heinberg: These movements, I think, are an inevitable result of the end of economic growth. If economic growth were occurring in all of these countries, we would not see people out on the streets. That's not to say that there wouldn't be problems worth protesting. The people in the Middle East have had to deal with these dictators for decades. Here in the United States, we have enormous political problems, problems of corruption in our government and so on. And people have every reason to be protesting those things, but they weren't up until just recently.
What has changed? Well, what's changed is, without economic growth, suddenly all the bills that the governments have been running up become un-repayable. With tax revenues declining, suddenly government debt becomes a real problem. So, governments respond to that by cutting back on spending.
What they're cutting back on, of course, are the support programs that people are relying upon, hundreds of millions of people around the world. And so, as those social safety nets are withdrawn, people have no recourse. At the same time, food prices are going up. We're seeing record food prices this year.
Especially in countries where people are paying a large share of their income for food, such as the countries of North Africa and the Middle East that have very large, young, fast-growing populations, people just have almost no recourse. They have to go out on the street, because their economic survival is in question. Same thing is happening in Greece, Ireland, and Portugal. And now it's come to the US, because here in the US we're also talking about implementing austerity programs.
Of course, we have a lot of people on television and in the Republican Party saying, "Oh, this is a good thing. If we have austerity, then that means that private enterprise will then be able to leap in and create all kinds of growth and jobs and so on." There's absolutely no evidence that that's the case. What we're seeing in countries that have implemented these austerity programs is rapidly declining GDP and increasing rates of homelessness and joblessness and plummeting tax revenues.
So, that's what we need to prepare ourselves for here in the US. A lot of people see the writing on the wall. They know what's already happened to them, and they see what's going to happen as a result of this, and they go out in the street and protest. I think, that's exactly the right thing to do.
TH: And you predict we'll be seeing more of this, then?
Heinberg: Yes, absolutely. The only thing that's going to change this trajectory we're on is a fundamental economic reform. That's what the protesters are really calling for. Whether they have a clear idea of what those reforms need to look like or not, the general direction is, I think, pretty evident.
One thing is an end to extreme economic inequality. As long as the economy was growing, then everybody could hope that the rising tide would eventually lift all boats and we'd all get rich. But now that the economy is static or contracting and it's like a shrinking pie. If you have a very small slice of that shrinking pie and somebody else has a huge slice, well, the unfairness of it all just becomes that much more blatant and socially unsustainable.
One thing we need to do is to deal with extreme economic inequality. But also, we need to downsize all these giant financial institutions that are running the world. We used to have an economy in the United States that was based on production, local production for local consumption.
But now production has been off-shored to China, and our economy has grown, for the last three or four decades, primarily through increase in debt and financial activity. That's unsustainable, and it's corrupting our politics as well as undermining our economic viability. That has got to change. It means re-regulating Wall Street and corporations.
Those two things, I think, have to be at the core of the demands of the movement if it's actually going to make any progress.