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LIMITS TO GROWTH?
Abstract: After a short introduction, The structure of the paper is as follows:
section II summarizes the pertinent developments during the past two centuries
and shows how the weights in the world economy have gradually shifted eastwards
since the 1950s. If this process continues,
words: world economy, development,
Are there limits to growth? And if yes, what kinds of growth are constrained by what sorts of factors? The present paper focuses on economic growth. Since the 1970s, the assumption that ecological factors impose natural limits on economic growth has gained increasing prominence in scientific circles, based on the premise that the environmental degradation associated with growth will ultimately lead to the collapse of our ecosystems. The only chance to prevent this from happening, or so the proponents of this view argue, is a radical change in economic policies, one that shifts their emphasis from promoting growth at any cost to qualitative concerns such as those outlined in utopias of a 'zero option' (Offe 1987) and similar doctrines.
If the assessment that
there are definite, soon-to-be-reached limits to growth were correct, then the
world would probably be doomed. For even if all understood the dangers, it
would still seem to be extremely unlikely that the major world powers will exit
the market economy, i.e. an economic system premised on perpetual growth,
anytime soon. On the contrary, given the remarkable socio-economic developments
that followed the introduction of market mechanisms in several newly
industrializing nations, especially in
Because the scenario to
which such a pessimistic view gives rise, while possibly realistic, would be
social scientifically sterile why bother if the world is going bust anyway?
, this paper construes (or rather, simply posits) a somewhat
'friendlier' outlook of the future, one in which technologies become
available that render economic growth ecologically sustainable. This is not to
dismiss the warnings about coming ecological disasters lightheartedly; I do in
fact take them quite seriously. For analytical purposes, it may nevertheless be
worthwhile to bracket these concerns momentarily and to assume
counterfactually, as it may turn out that no limits to growth exist or that
the ones that do exist will become manageable. For such an assumption allows us
to explore alternative future scenarios, ones that would hardly be worth
pursuing if we already knew we have no future. So provided we have a future,
then where is the world headed in the 21st century? This is the
question I will address in the pages ahead, with special emphasis given to
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Revised, extended and partly updated version of a paper originally prepared for the plenary session 'Natόrliche Grenzen von Sozialstaat und Wachstum?' [Natural Limits of the Welfare State and to Economic Growth?] at the 33rd congress of the German Sociological Association, 9-13 October 2006 in Kassel, Germany.
As late as 1965, writes Jeffrey Sachs (2000: 38f.), only the West, Japan and the four East Asian 'tigers' (together representing no more than 21 per cent of the world's population) were 'genuinely capitalist in orientation'. Now, the majority of the world's population lives either under capitalist economic institutions or in countries moving towards their introduction and consolidation; a complete reversal of the situation just thirty years ago.
Note also how expectations change as people get accustomed to higher performance levels: an annual growth rate of 1.2 per cent that was rightly judged as spectacular in the mid-19th century would now widely be viewed as a symptom of crisis and stagnation.
The initial reforms that introduced rudimentary market mechanisms in the agricultural sector were discussed and decided upon at a Communist Party meeting held in 1978, but did not take effect before 1979.
If the data provided by the IMF (2008) are to be trusted, then the increase would be even greater than that: according to these data, China's (purchasing power adjusted) per capita incomes rose more than twentyfold between 1980 (US$ 252) and 2007 (US$ 5,300) alone.
Western Europe's share of world GDP peaked in the late 19th century and declined steadily thereafter; a century later, it had gone down from one third (33.6 per cent) of the world economy (in 1870) to one fifth (20.6 per cent, in 1998). The share of the West as a whole, however, continued to increase until 1950 (peaking at 56.9 per cent) due to the growing impact of the Western offshoots (North America, Australia and New Zealand). Between 1950 and 1998, this share dropped to 45.7 per cent, while that of Asia more than doubled from 18.5 per cent to 37.2 per cent (Maddison 2001: 263). Between 1980 and 2006, Asia's real economic product tripled, and with 22 per cent of the global economic product, the region's share of world GDP now matches that of 'Euroland'.
The Economist's prediction is based on purchasing power parities. Using exchange rates, the combined GDP of the four countries would still be significantly above that of India in 2026, but below that of China which would then be the world's second largest economy, rather than the largest, as indicated above. The overall trend would nevertheless stay the same.
The IMF estimates that by 2013, China's per capita income should reach roughly PPP US$ 9,700, the level of Germany in 1980 (International Monetary Fund 2008). Note that China's annual income gains now match (in several cases even surpass) the total per capita incomes of many of the world's poorest countries (see United Nations Development Programme 2006: 283-286).
National Bureau of Statistics of China 2005. As widely reported in the world press, China's National Bureau of Statistics revised its figures for the tertiary sector upward in December 2005, leading to a relative downgrading of the respective figures for the primary and secondary figures compared to those given in the country's Statistical Yearbook 2005.
All dollar amounts given in the above paragraph are calculated according to the exchange rate method. A study reported by Croll (2006: 313) and using purchasing power parities estimated that by 2003, 2.2 per cent of the Chinese population (those living in some of the most developed cities) had reached income levels equal to US$ 27,700 annually, while another 22 per cent enjoyed mid-level incomes of US$ 9,200.
'Increasingly, it is what China chooses that will determine the West's economic future, not the other way around', as Prestowitz (2005: 77) comments on the country's economic rise, and he adds the same will hold for geopolitical developments, technological innovation and other important areas.
For a detailed discussion of China's recent engagement in Africa, see Wild/Mepham 2006. In November 2006, China held a Sino-African conference in Beijing to which the political leaders of the entire continent bar five countries that have kept allegiance with Taiwan were invited. A gathering of this order and symbolic significance (in the weight it accords the troubled continent) is without historical precedent.
Inglehart and Welzel (2005: 156) argue forcefully that the chances that China will democratize increase with growing prosperity (they even predict China will become a democracy 'within the next fifteen to twenty years'), in which case China's rise would not only leave the above world models intact, but confirm their global appeal. But while this may be a plausible course of development, history may also take a different turn. The case of Singapore shows that it is possible to reach very high levels of socio-economic development without adopting a full-fledged liberal democracy and this has not gone unnoticed in Beijing. Nor would such a polity necessarily be unpopular with the Chinese middle classes (see Unger 2006) without whose support a transition to democracy is hard to conceive. One should therefore not rule out the possibility that a moderate form of authoritarianism, or a 'partly free' political system in the language of Freedom House, might stabilize itself in the long run (see also He 2003 on the possibility of the emergence and gradual consolidation of a 'mixed' political system in China, one that blends various authoritarian and democratic elements of governance).
The latest world university ranking conducted by the Times Higher Education Supplement (October 2007) contains just three continental European universities, but seven East Asian universities, among its top 50. The only European country that performs well in this ranking is Great Britain (with eight universities in the top group). The highest position reached by a German university (Heidelberg) is rank 60 a remarkable result for a country whose universities were once admired across the globe. Things don't look much better if one relies instead on the Shanghai index instead, wherein the best performing German universities are presently (2007) accorded ranks 53 (University of Munich) and 54 (Technical University of Munich), respectively (https://ed.sjtu.edu.cn/rank/2007/ARWU2007FullListByRank.pdf).
For example, using the Human Development Index of the United Nations as a yardstick, affluent urban Shanghai would rank 24 in the global HDI league (alongside Greece), while poor rural Guizhou Province would find itself alongside Botswana, ranked 131 (United Nations Development Programme 2006: 271). Also, regional growth rates differ substantially. However, even the worst performing province (Qinghai) grew by 5.9 per cent annually between 1978 and 2004 (Chaudhuri/Ravallion 2006), more than Germany during its miracle growth phase.
For a brief overview of East Asian welfare policies and regimes, see Schmidt 2008. It is perhaps worth noting that economic historians believe the working conditions facing Japanese workers during the country's initial phase of industrialization may have been worse than those in Britain and several other European countries in the first half of the 19th century (Landes 1998: 383ff.). They did not stay that way.
Put another way and using the World Bank's recently revised poverty standard, the number of Chinese having to live on less than US$ 1.25 per day fell by 600 million between 1981 and 2005 (Chen/Ravallion 2006 : 21).
But how could the European social sciences contribute to this preparation? One thing they would need to take would be to overcome their methodological regionalism, their strong centering on Europe and/or the West as (more or less exclusive) objects of study and interest. For if they do not come to terms with globalization, which implies extending the scope of their analytical horizon to the entire globe, they will be increasingly hard put to understand even the challenges facing their own region.
The above-quoted statement may sound rude to Europeans but reflects a broader change of mood in Asia. Once revered as a model of modernity, Asian elites now widely see Europe as a continent of the past. A recent newspaper article (Straits Times, 29 April 2006) cites former Singaporean prime minister Lee Kuan Yew saying 'Europe will soon become irrelevant for anything other than tourism and high-end real estate' if Europeans continue on their current course, and a prominent Chinese businessman warning at a gathering of economic and political leaders held in Paris earlier that year 'You Europeans are becoming a Third World country, you spend time on the wrong questions the Constitution, the welfare state, the pensions crisis and you systematically give the wrong answers to the questions you raise'.
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