Economic Growth & Environmental Problems

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Economic growth is potentially a good thing. More jobs for people who want one. Better pay for each job. More opportunity for start-up businesses to find a market. There are, however, positive and negative effects of economic growth and one of the negatives is the damage growth does to the environment. The impact of economic growth on the environment is often negative. Some economists and scientists argue that this isn't necessarily true: it might be possible to have both.

Economic Growth and Environmental Damage

Environmentalists and ecologists see lots of environmental problems caused by the economic development of the past century or two.

Consider crude oil. Oil is the source of gasoline, heating oil and plastics. The oil industry and related fields have generated billions of dollars for investors and owners, created thousands of jobs and enabled the growth of other industries, such as automotive and plastics. The United States economy couldn't have grown as fast without the power of oil. In our personal lives we benefit from being able to drive or fly around the country, and from plastic consumer goods being so cheap. The downside is the environmental damage:

  • Drilling for oil can damage ecosystems.
  • Drilling often requires killing off plants on the site before drilling begins.
  • Oil spills contaminate land and water, often killing thousands of living creatures.
  • Automobile exhausts pollute the air. 

Economic growth has also made it possible for the industry to improve and upgrade its technology. That can mitigate some of the harmful impacts. Remote-sensing technologies and seismic scanning reduce the number of exploratory wells that have to be drilled, for instance.

Consider plastic. Once considered a miracle of the industrial age, plastic has become part of how we live our daily lives. Our toothbrushes are plastic. Many of our children's toys are plastic. The bags we use for everything from trash to shopping to sealing food to keep it fresh are plastic. Economic growth makes it possible for people to afford more plastics, and for the industry to expand and create more plastic to meet the needs.

There's a price for the many benefits. Only a small fraction of plastic will degrade and break down. Most plastic, if it's thrown in a landfill or dropped in the ocean, will endure forever. More plastic in use means more plastic accumulates in the environment. By 2050, it's estimated the mass of plastic in the world's oceans will be greater than the mass of fish. Fish or other animals that eat plastic die painfully as it can't be digested like real food.

Global warming is one of the major environmental issues facing the world in 2018. Fossil fuels such as oil and coal make greater economic growth possible but add gases to the atmosphere that increase the global warming effect. Some nations worry that taking steps to curb global warming would restrict their industries so much it would hurt economic growth. Other nations fear that reducing the use of fossil fuels will reduce the value of their resources.

Winners and Wasters

Growth versus the environment isn't a new issue. The medieval poem "Winner and Waster" discusses many topics familiar to the 21st century, such as whether it's better to save your money than spend it to impress your neighbor. The wealthy, spendthrift Waster chops down the forest on his land to sell the wood, and to keep away even the slightest chill with a big roaring fire. The more miserly Winner warns Waster that the amount of trees he's chopping isn't environmentally sustainable. Waster's children will have to travel 15 miles further to find wood for their fireplaces.

The same debate continues today as to whether the environmental problems caused by economic development are a good enough reason to reduce economic growth. Opposing sides debate the facts as well as the issue: how much damage is growth doing? How much will environmental regulation hurt the economy? Both sides offer statistics and research to support their conclusions, making it difficult for the average person to figure out which has the real facts on their side.

Is Environmentalism a Luxury?

A counter-argument to industrial development and environmental issues being opposed to each other is that growth is good for the environment. Only when a country reaches a certain level of growth and economic strength is it able to think about reducing the environmental damage. Third World countries that want to achieve First or at least Second World levels of comfort, education and wealth can't do it without lots of economic growth.

Economists have worked this out as a mathematical formula; the Environmental Kuznets Curve. The original version of the curve, which is shaped like an inverted U, predicts that as economic growth ramps up, the effects won't be distributed equally. The rich will get richer, the poor will get poorer and the gap between them will grow. Eventually, at the peak of the curve, things change, and economic inequality starts to go down.

The environmental version of the curve makes a similar argument. Economic growth in a given country makes the environment worse until it reaches the peak of the Kuznets Curve, at which point people are making a decent living. Now they can afford to think about reducing growth, and that nation has a more advanced technology available to reduce the impact of economic growth on the environment. In the U.S., for example, greater income makes it possible to purchase electric cars which use less oil and don't pollute as much.

Being able to afford concern for the environment doesn't guarantee it'll happen, however. Even in a country with a growing economy and good incomes, the government may have to intervene and regulate pollutants to prevent environmental damage.

What Is Decoupling Growth?

Another debate is whether it's possible to sustain a healthy environment without affecting economic growth. Economists describe this as "decoupling" growth from the use of natural resources: Find eco-friendly ways to grow without using more raw materials or increasing pollution. Then the economy can grow with a clear environmental conscience.

It's a fantastic solution, but is it possible? The debate is all over the map. Pro-growth economists argue that decoupling is attainable. Other economists argue that industrial development and environmental issues will never be able to play nice with each other. A better way to protect the environment is to make society's goal greater happiness or health rather than insisting on economic growth.

Predicting the Future

One school of environmental scientists predict that the impact of economic growth on the environment will be disastrous well before the end of the current century. Government and industry don't want to set limits on economic growth, and there's no agreement on how to minimize environmental damage. As a result, nothing will be done, and the world will go down the tubes.

A counter-argument is that predicting the future has never been easy. Winner and Waster couldn't have imagined the effects of globalization or the industrial revolution on their world. Even a century ago, the shape of the world's future looked very different from the way events actually turned out. Nuclear power, solar power, computers and television would have been science fiction. Even something as seemingly mundane as the interstate highway system wouldn't come into existence for several decades. Problems that look insoluble to us now may be easy to fix after the next big tech breakthrough. For example, researchers are studying ways to break down plastic, or use plastic to draw methane, a contributor to global warming, out of the atmosphere.

Skeptics suggest that assuming the future will find a miracle cure is dangerously optimistic. And that even if a groundbreaking technology does appear, it may still take government regulation or intervention to bring it into wide use.

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About the Author

Fraser Sherman has written about every aspect of business: how to start one, how to keep one in the black, the best business structure, the details of financial statements. He's also run a couple of small businesses of his own. He lives in Durham NC with his awesome wife and two wonderful dogs. His website is frasersherman.com