Reversal of Fortune

for most of human history, the two birds More and Better roosted on the same branch. You could toss one stone and hope to hit them both. That's why the centuries since Adam Smith launched modern economics with his book The Wealth of Nations have been so single-mindedly devoted to the dogged pursuit of maximum economic production. Smith's core ideas—that individuals pursuing their own interests in a market society end up making each other richer; and that increasing efficiency, usually by increasing scale, is the key to increasing wealth—have indisputably worked. They've produced more More than he could ever have imagined. They've built the unprecedented prosperity and ease that distinguish the lives of most of the people reading these words. It is no wonder and no accident that Smith's ideas still dominate our politics, our outlook, even our personalities.

But the distinguishing feature of our moment is this: Better has flown a few trees over to make her nest. And that changes everything. Now, with the stone of your life or your society gripped in your hand, you have to choose. It's More or Better.

Which means, according to new research emerging from many quarters, that our continued devotion to growth above all is, on balance, making our lives worse, both collectively and individually. Growth no longer makes most people wealthier, but instead generates inequality and insecurity. Growth is bumping up against physical limits so profound—like climate change and peak oil—that trying to keep expanding the economy may be not just impossible but also dangerous. And perhaps most surprisingly, growth no longer makes us happier. Given our current dogma, that's as bizarre an idea as proposing that gravity pushes apples skyward. But then, even Newtonian physics eventually shifted to acknowledge Einstein's more complicated universe.

1. "We can do it if we believe it": FDR, LBJ, and the invention of growth

it was the great economist John Maynard Keynes who pointed out that until very recently, "there was no very great change in the standard of life of the average man living in the civilized centers of the earth." At the utmost, Keynes calculated, the standard of living roughly doubled between 2000 B.C. and the dawn of the 18th century—four millennia during which we basically didn't learn to do much of anything new. Before history began, we had already figured out fire, language, cattle, the wheel, the plow, the sail, the pot. We had banks and governments and mathematics and religion.

And then, something new finally did happen. In 1712, a British inventor named Thomas Newcomen created the first practical steam engine. Over the centuries that followed, fossil fuels helped create everything we consider normal and obvious about the modern world, from electricity to steel to fertilizer; now, a 100 percent jump in the standard of living could suddenly be accomplished in a few decades, not a few millennia.

In some ways, the invention of the idea of economic growth was almost as significant as the invention of fossil-fuel power. But it took a little longer to take hold. During the Depression, even FDR routinely spoke of America's economy as mature, with no further expansion anticipated. Then came World War II and the postwar boom—by the time Lyndon Johnson moved into the White House in 1963, he said things like: "I'm sick of all the people who talk about the things we can't do. Hell, we're the richest country in the world, the most powerful. We can do it all.... We can do it if we believe it." He wasn't alone in thinking this way. From Moscow, Nikita Khrushchev thundered, "Growth of industrial and agricultural production is the battering ram with which we shall smash the capitalist system."

Yet the bad news was already apparent, if you cared to look. Burning rivers and smoggy cities demonstrated the dark side of industrial expansion. In 1972, a trio of mit researchers released a series of computer forecasts they called "limits to growth," which showed that unbridled expansion would eventually deplete our resource base. A year later the British economist E.F. Schumacher wrote the best-selling Small Is Beautiful. (Soon after, when Schumacher came to the United States on a speaking tour, Jimmy Carter actually received him at the White House—imagine the current president making time for any economist.) By 1979, the sociologist Amitai Etzioni reported to President Carter that only 30 percent of Americans were "pro-growth," 31 percent were "anti-growth," and 39 percent were "highly uncertain."

Such ambivalence, Etzioni predicted, "is too stressful for societies to endure," and Ronald Reagan proved his point. He convinced us it was "Morning in America"—out with limits, in with Trump. Today, mainstream liberals and conservatives compete mainly on the question of who can flog the economy harder. Larry Summers, who served as Bill Clinton's secretary of the treasury, at one point declared that the Clinton administration "cannot and will not accept any 'speed limit' on American economic growth. It is the task of economic policy to grow the economy as rapidly, sustainably, and inclusively as possible." It's the economy, stupid.

2. Oil bingeing, Chinese cars, and the end of the easy fix

except there are three small things. The first I'll mention mostly in passing: Even though the economy continues to grow, most of us are no longer getting wealthier. The average wage in the United States is less now, in real dollars, than it was 30 years ago. Even for those with college degrees, andlthough productivity was growing faster than it had for decades, between 2000 and 2004 earnings fell 5.2 percent when adjusted for inflation, according to the most recent data from White House economists. Much the same thing has happened across most of the globe. More than 60 countries around the world, in fact, have seen incomes per capita fall in the past decade.

For the second point, it's useful to remember what Thomas Newcomen was up to when he helped launch the Industrial Revolution—burning coal to pump water out of a coal mine. This revolution both depended on, and revolved around, fossil fuels. "Before coal," writes the economist Jeffrey Sachs, "economic production was limited by energy inputs, almost all of which depended on the production of biomass: food for humans and farm animals, and fuel wood for heating and certain industrial processes." That is, energy depended on how much you could grow. But fossil energy depended on how much had grown eons before—all those billions of tons of ancient biology squashed by the weight of time till they'd turned into strata and pools and seams of hydrocarbons, waiting for us to discover them.

To understand how valuable, and irreplaceable, that lake of fuel was, consider a few other forms of creating usable energy. Ethanol can perfectly well replace gasoline in a tank; like petroleum, it's a way of using biology to create energy, and right now it's a hot commodity, backed with billions of dollars of government subsidies. But ethanol relies on plants that grow anew each year, most often corn; by the time you've driven your tractor to tend the fields, and your truck to carry the crop to the refinery, and powered your refinery, the best-case "energy output-to-input ratio" is something like 1.34-to-1. You've spent 100 Btu of fossil energy to get 134 Btu. Perhaps that's worth doing, but as Kamyar Enshayan of the University of Northern Iowa points out, "it's not impressive" compared to the ratio for oil, which ranges from 30-to-1 to 200-to-1, depending on where you drill it. To go from our fossil-fuel world to a biomass world would be a little like leaving the Garden of Eden for the land where bread must be earned by "the sweat of your brow."

And east of Eden is precisely where we may be headed. As everyone knows, the past three years have seen a spate of reports and books and documentaries suggesting that humanity may have neared or passed its oil peak—that is, the point at which those pools of primeval plankton are half used up, where each new year brings us closer to the bottom of the barrel. The major oil companies report that they can't find enough new wells most years to offset the depletion in the old ones; rumors circulate that the giant Saudi fields are dwindling faster than expected; and, of course, all this is reflected in the cost of oil.

The doctrinaire economist's answer is that no particular commodity matters all that much, because if we run short of something, it will pay for someone to develop a substitute. In general this has proved true in the past: Run short of nice big sawlogs and someone invents plywood. But it's far from clear that the same precept applies to coal, oil, and natural gas. This time, there is no easy substitute: I like the solar panels on my roof, but they're collecting diffuse daily energy, not using up eons of accumulated power. Fossil fuel was an exception to the rule, a one-time gift that underwrote a one-time binge of growth.

This brings us to the third point: If we do try to keep going, with the entire world aiming for an economy structured like America's, it won't be just oil that we'll run short of. Here are the numbers we have to contend with: Given current rates of growth in the Chinese economy, the 1.3 billion residents of that nation alone will, by 2031, be about as rich as we are. If they then eat meat, milk, and eggs at the rate that we do, calculates ecostatistician Lester Brown, they will consume 1,352 million tons of grain each year—equal to two-thirds of the world's entire 2004 grain harvest. They will use 99 million barrels of oil a day, 15 million more than the entire world consumes at present. They will use more steel than all the West combined, double the world's production of paper, and drive 1.1 billion cars—1.5 times as many as the current world total. And that's just China; by then, India will have a bigger population, and its economy is growing almost as fast. And then there's the rest of the world.

Trying to meet that kind of demand will stress the earth past its breaking point in an almost endless number of ways, but let's take just one. When Thomas Newcomen fired up his pump on that morning in 1712, the atmosphere contained 275 parts per million of carbon dioxide. We're now up to 380 parts per million, a level higher than the earth has seen for many millions of years, and climate change has only just begun. The median predictions of the world's climatologists—by no means the worst-case scenario—show that unless we take truly enormous steps to rein in our use of fossil fuels, we can expect average temperatures to rise another four or five degrees before the century is out, making the globe warmer than it's been since long before primates appeared. We might as well stop calling it earth and have a contest to pick some new name, because it will be a different planet. Humans have never done anything more profound, not even when we invented nuclear weapons.

How does this tie in with economic growth? Clearly, getting rich means getting dirty—that's why, when I was in Beijing recently, I could stare straight at the sun (once I actually figured out where in the smoggy sky it was). But eventually, getting rich also means wanting the "luxury" of clean air and finding the technological means to achieve it. Which is why you can once again see the mountains around Los Angeles; why more of our rivers are swimmable every year. And economists have figured out clever ways to speed this renewal: Creating markets for trading pollution credits, for instance, helped cut those sulfur and nitrogen clouds more rapidly and cheaply than almost anyone had imagined.

But getting richer doesn't lead to producing less carbon dioxide in the same way that it does to less smog—in fact, so far it's mostly the reverse. Environmental destruction of the old-fashioned kind—dirty air, dirty water—results from something going wrong. You haven't bothered to stick the necessary filter on your pipes, and so the crud washes into the stream; a little regulation, and a little money, and the problem disappears. But the second, deeper form of environmental degradation comes from things operating exactly as they're supposed to, just too much so. Carbon dioxide is an inevitable byproduct of burning coal or gas or oil—not something going wrong. Researchers are struggling to figure out costly and complicated methods to trap some CO2 and inject it intdlderground mines—but for all practical purposes, the vast majority of the world's cars and factories and furnaces will keep belching more and more of it into the atmosphere as long as we burn more and more fossil fuels.

True, as companies and countries get richer, they can afford more efficient machinery that makes better use of fossil fuel, like the hybrid Honda Civic I drive. But if your appliances have gotten more efficient, there are also far more of them: The furnace is better than it used to be, but the average size of the house it heats has doubled since 1950. The 60-inch TV? The always-on cable modem? No need for you to do the math—the electric company does it for you, every month. Between 1990 and 2003, precisely the years in which we learned about the peril presented by global warming, the United States' annual carbon dioxide emissions increased by 16 percent. And the momentum to keep going in that direction is enormous. For most of us, growth has become synonymous with the economy's "health," which in turn seems far more palpable than the health of the planet. Think of the terms we use—the economy, whose temperature we take at every newscast via the Dow Jones average, is "ailing" or it's "on the mend." It's "slumping" or it's "in recovery." We cosset and succor its every sniffle with enormous devotion, even as we more or less ignore the increasingly urgent fever that the globe is now running. The ecological economists have an enormous task ahead of them—a nearly insurmountable task, if it were "merely" the environment that is in peril. But here is where things get really interesting. It turns out that the economics of environmental destruction are closely linked to another set of leading indicators—ones that most humans happen to care a great deal about.