We need to grow our economy to advance humanity
But that doesn't mean we need to destroy the environment making flying cars.
Historically, the more energy we used, the richer we became, and the more that helped humanity. But, according to McKinsey, that relationship will not continue.
“Our analysis suggests that while a more populous world will create more wealth than ever, energy demand rates will plateau, and demand rates for fossil fuels will begin to decline worldwide.”
The world is going to have more people and more wealth, but we won’t need any more energy to do it? How could that be?
As that chart shows, we’ve been replacing fossil fuels with renewable energy pretty aggressively since 2000, and that will only continue. According to the World Economic Forum, more than a third of our global energy will come from renewable sources by 2025. And we are becoming more energy efficient which means it doesn’t take as much energy to do things as it used to. The lights in our houses, the way we heat and cool our homes, even the cars we drive use much less energy than they did 25 years ago, and that will only continue too.
Our energy use will plateau or even decline, but that doesn’t mean we can’t still grow or maintain our economy from here. As I mentioned in my last essay, once an economy’s basic needs are met, it doesn’t need a lot more from the environment. It took a lot of environmental resources to build my home 100 years ago, and build furniture for it decades ago, but now I only need a small allotment of gas and electricity going forward. Most of my money is spent on Kindle books, Substack subscriptions, my Spotify and New York Times crossword apps—things that don’t require a lot of environmental resources.
Over time, our economies become less dependent on environmental resources and more dependent on “services,” and that’s why we’re calling this phase in our development “the rise of the service economy.”
“Advanced economies tend to become service economies, and the energy intensity of service sectors is substantially lower than that of industrial sectors—in some cases, as low as one-twentieth,” McKinsey says. “Services already are dominant within [advanced] countries, with the service sector in the United States, for example, contributing about 80 percent to national GDP.”
As a result, many advanced economies have already decoupled energy use from economic growth. In rich countries like the UK, Switzerland, Germany, Denmark, and Sweden, GDP has increased as energy use has plateaued and even decreased.
All of the advanced economies that currently exist needed a lot of energy to get to this point, but emerging economies won’t need to do that. The McKinsey report points out that renewable energy sources will be less expensive than traditional fossil fuel sources by 2030 and almost 75% of those tipping points will occur by 2025. That means that within the next two years, still developing economies will be able to skip the fossil fuel-intensive part of their development and immediately make everything they need using renewable and efficient energy.
After a century of rapid growth that was very energy intensive to achieve, our energy use has plateaued since 1970, leading many futurists to fret that the next 100 years won’t see the same exponential growth that the last 100 years did. In his book, Where Is My Flying Car, J. Storrs Hall points to the incredible number of inventions we made in the last century. “A hundred years ago, people knew that the future was going to be wonderful. And they were right,” he says. “They lived through decades of spectacular accomplishments—cars, radios, airplanes, electricity illuminating homes and cities.”
By comparison, he says the future we face now is bleak. If we were just willing to use exponentially more energy, we’d make exponentially more money, and come up with exponentially more innovations. He imagines “a world in which everyone can afford a million-dollar flying car and vacation around the rings of Saturn... where we build cities on the sea and colonies in space.” He laments that we haven’t yet achieved the sci-fi future once imagined by The Jetsons and says that if we had just kept up the trajectory we were on until 1970, “we might just have had flying cars, space travel, and the rest before 2062.”
As exciting as that future may sound, those technologies are just not as important to our lives as electricity, air conditioning, and air travel have been. As Robert J. Gordon points out in The Rise and Fall of American Growth: “American growth slowed down after 1970 not because inventors had lost their spark or were devoid of new ideas, but because the basic elements of a modern standard of living had by then already been achieved along so many dimensions, including food, clothing, housing, transportation, entertainment, communication, health, and working conditions.”
And we have come up with many life-altering innovations since then, like the internet. Aspoints out in his book The Great Stagnation, George Jetson may have had a flying car, but he didn’t have a smartphone, and we could never have imagined how that innovation would completely change our lives, and with surprisingly little need of the economy. “The funny thing about the internet, from an economic point of view,” Cowen says, “is that so many of the products are free.”
There are many companies that make money from the internet, but for the average user, it’s free to use. Google makes money, but it has given all of us the ability to search the web for free. Duolingo makes money, but it has given people the ability to learn a language for free. Spotify and YouTube make money, but we can listen to music and watch videos for free. And how incredible is it that our most significant innovation of the last half century democratized access to knowledge and made it available to the world as a public good?
We have connected people, we have enabled remote work, we have developed remote access to medicine and instant access to journalism—all while causing very little environmental harm. The internet accounts for only 3.7% of global greenhouse emissions. Compare that to other industries:
We used to define “progress” in terms of what we could create on the factory floor because that’s how we achieved progress over the last 100 years. But developed countries have everything that can be made on a factory floor, and the countries that aren’t yet developed can make them with renewable energy. In the next 100 years I think we’ll define “progress” less in terms of what we can make, and more in terms of how we better our lives.
The most significant way we can better our lives from here is not with flying cars and trips to Saturn, it’s to develop all the rest of the countries and swap all of our unrenewable energy sources for renewable ones. And we could achieve both goals within the next 100 years.
To develop all of the countries that aren’t yet developed, our global economy will need to increase at least fivefold—from $105 trillion to $525 trillion. We’ve increased our global economy by fivefold in the last five decades so it wouldn’t be unprecedented to achieve that by 2070. IIASA thinks our economy will get much larger than that—that our global GDP will grow up to $1,000 trillion by the year 2100 with global average incomes of $140,000 per year. And many projections believe we are on track to replace all of our energy with green energy by 2050, or at least within a few decades of that.
By the year 2100, we could very well be looking at a world in which the global economy is so large that everyone is earning at least $140,000 per person, even as we use much less of the environment to achieve it. Poverty will be eradicated and wealthy countries around the world will make advances in public health, education, transportation, science, and technology, and all of those advancements will use much less energy and contribute much less to the economy than they do today. And that’s a much more promising future to me, than having a flying car to navigate it.
But I’d love to know your thoughts. Join us in the literary salon for a conversation about growth 👇🏻
Next week I’ll be thinking through what we want the economy of 2100 to look like.
Thank you for reading,
Here are some additional notes from the margins of my research: