Session 1: Models of the economy and environment

Introduction

Since the eighteenth century, economic growth has been a primary goal of both firms and governments. Adam Smith (1776) famously propounded that, as individuals pursue their own self-interests, they also unwittingly contribute to the greater good. In support of this view, it can be argued that, in modern times, growing global GDP per capita has been associated with falling levels of absolute poverty as shown in Figure 1. However, this blunt measure overlooks the importance of the inequalities in income and wealth and the quality of the lived experience beyond just monetary subsistence.

Maximise

Source: World Bank 2024a; World Bank 2024b

Figure 1: World GDP per capita (constant 2015 US $) and poverty rate (living on less than $2.15 per day at 2017 prices), 1981–2022

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A line chart comparing growth in global GDP with a falling poverty rate over time. The horizontal axis shows years from 1981 to 2022 in intervals of one year. The vertical axis on the left measure GDP per capita at constant 2015 prices in US dollars. Its scale runs from 0 to 12000 in intervals of 2000. There is also a vertical axis on the right which measures poverty rate as a % of population. Its scale runes from 0 to 100 in intervals of 10 percentage points. There are two lines on the chart. The upper line starts showing GDP per capita starts at around $6000 in 1961 and rise steadily upwards to around $11,600 by 2022 with just a couple of minor downward dips around 2008 and 2020. The lower line showing poverty starts in 1961 at around 43% and falls steadily to reach around 10% by 2022.

Figure 1: World GDP per capita (constant 2015 US $) and poverty rate (living on less than $2.15 per day at 2017 prices), 1981–2022

Moreover, in the mid-twentieth century, pockets of experts around the world had already started to question whether continuous, unlimited economic growth was desirable or even possible. In 1968, some of these experts formed a group, the Club of Rome, whose aim was to draw attention to, and try to address, the global problems they perceived. A seminal report, The limits to growth, (Meadows et al, 1972) from the group proposed five inter-related factors that determine but ultimately limit growth: population, agricultural production, natural resources, industrial production and pollution. Having developed a mathematical model to simulate the trajectory and impact of these factors, the report (Meadows, et al,1972, pp.23-24) concluded:

1. If the present growth trends in world population, industrialization, pollution, food production, and resource depletion continue unchanged, the limits to growth on this planet will be reached sometime within the next one hundred years. The most probable result will be a rather sudden and uncontrollable decline in both population and industrial capacity.
2. It is possible to alter these growth trends and to establish a condition of ecological and economic stability that is sustainable far into the future. The state of global equilibrium could be designed so that the basic material needs of each person on earth are satisfied and each person has an equal opportunity to realize his individual human potential.
3. If the world’s people decide to strive for this second outcome rather than the first, the sooner they begin working to attain it, the greater will be their chances of success.

The authors updated their findings on the 20th and 30th anniversaries of the original report and sounded increasingly urgent warnings that the world was overshooting the limits to growth (Meadows et al, 1993, and Meadows et al, 2004, cited in Academy for Systems Change, 2024). Today, we already live in a world that is facing significant and escalating problems associated with global warming, water pollution, declining biodiversity and other forms of environmental degradation. The second of the report’s conclusions (point 2 in the quote above) is still work in progress, with world leaders so far agreeing only to limited global cooperation and dragging their heels in implementing national agreements.

Reasons for the lack of significant progress are many, in particular the vested interest and power of lobbying groups representing fossil-fuel producers and associated industries (such as cars and plastics). For example, Supran and Oreskes (2017, 2020) document a decades-long campaign by the fossil fuel producers Exxon, Mobil and the subsequently merged ExxonMobil Corp to promote climate-change denial and delay policy changes that could threaten their interests. A key global summit on climate change in 2023 was controversially held in Dubai (in the oil-producing United Arab Emirates) and attended by ‘at least 2556 fossil fuel lobbyists’ (Kick Big Polluters Out, 2023). The summit was notable for watering down a proposal to phase out the use of fossil fuels to a lesser commitment to transition away from them (UNSDG, 2023). The following year’s summit was also hosted by an oil-producing state: Azerbaijan (UNCC, 2024).

Another possible reason for slow progress on tackling climate change is the way that ‘sustainability’ has come to be defined. The most common definition is: ‘meeting the needs of the present without compromising the ability of future generations to meet their own needs’ (World Commission on Environment and Development, 1987, p.40 ‒ often called the Brundtland Report). This leaves much room for interpretation of ‘needs’ and ‘ability’ and how these might be estimated and measured. It also frames environmental damage as manifesting in the future, which tends to downplay the urgency of the situation. However, the pace of climate change has accelerated and, increasingly, the world today is experiencing its disruptive consequences, such as floods, droughts, wildfires, severe storms and heatwaves. The worst effects are being borne both now and in the future by those who have least, particularly the countries of the Global South (United Nations, 2021).

The Secretary General of the United Nations has stated: ‘it is not all doom and gloom. Many countries have the will to take more ambitious steps on climate action. But the world needs to mobilise to ensure that there is a way’ (Gutteres, 2024). However, there is no consensus on how to do that. The way forward depends on your view of the underlying reality of the world.