The Illusion of Indefinite Growth and Its Economic Consequences: A Rewritten Version
The Illusion of Endless Growth: A Looming Economic Crisis
Economists, actuaries, and others often make forecasts as if the current situation will continue indefinitely, ignoring the possibility of change. Politicians want re-election, university presidents want students to believe in the future value of degrees, and no one wants to hear unfavorable predictions. But here's where it gets controversial: the assumption of indefinite growth has led to a series of economic consequences that may be harder to reverse than we think.
Between the end of World War II and 1973, oil prices were low, and the supply seemed endless. This led to promises of prosperity, but it was a temporary situation. When the reality of finite resources hit, debt bubbles burst, and the economy took a hit. This is a critical issue that I addressed in my talk at the Minnesota Degrowth Summit.
In this post, I'll provide a rewritten version of my talk, highlighting key points. I'll also share a PDF of my presentation (https://ourfiniteworld.com/wp-content/uploads/2025/10/Tverberg-Presentation-Oct-25-1.pdf) and a Vimeo recording (https://vimeo.com/1131063715) of the summit, including a transcript. You can access the transcript and the outline of timings by scrolling down on the front page of the recording.
The US Oil Supply Boom and Its End
From 1920 to 1970, US oil supply grew rapidly. Early oil was easy to extract and close to customers. Physicists, including M. King Hubbert, warned that this couldn't last, but most assumed obstacles were far off. Other countries produced oil, too, and the US still had some oil, but it required more complex operations, like extracting oil from Alaska.
Low oil prices were beneficial for the economy as long as they lasted. But here's the catch: oil and energy are like food for the economy. When prices were low, there was room for buying extras. Small businesses thrived, and there was no need for deep hierarchies or advanced energy-saving devices.
The Middle Class and the Economy
The economy needs a strong middle class to maintain buying power for goods like vehicles and new homes, keeping oil prices stable. If the middle class disappears or young people earn less than their parents, it becomes challenging to sustain oil and energy prices. Prices must be high enough for producers and low enough for consumers.
Recessions occurred when oil prices rose, and governments had to bail out the economy with more debt. Since 2008, the US debt-to-GDP ratio has skyrocketed, with a significant portion used to fund programs for the poor and elderly. The current debt level is considered too high, and one analysis suggests that a debt-to-GDP ratio above 90% inhibits economic growth.
The Stagflation Stage and Secular Cycles
Growing debt, especially during the Stagflation Stage, is a concern for researchers studying secular cycles, long-term cycles that take centuries. In the book 'Secular Cycles' by Peter Turchin and Sergey Nefedov, a group temporarily surges in population by acquiring land (often through deforestation or war). When the population reaches the area's carrying capacity, growth slows, and wage and wealth disparity increase, along with debt.
Turchin and Nefedov's study of eight societies found that populations tend to collapse over 20 to 50 years. These cycles are linked to growth and collapse periods analyzed in Prof. Joseph Tainter's 'The Collapse of Complex Societies'.
The Future Looks Worrying
My analysis suggests that the assumption of indefinite growth has led to economic consequences that may be challenging to reverse. The future looks worrying, and it's essential to consider the implications of finite resources and the potential for economic collapse.
For Regular Readers
- My presentation had 51 slides, available in the PDF.
- A rapidly growing energy supply with high EROI wouldn't prevent collapse indefinitely; other issues would emerge.
- I included EROI for those familiar with the concept.
- Extenders like wind, solar, and nuclear need high EROIs but may not be long-term solutions due to system limits.
By Gail Tverberg, Our Finite World
