Can economic growth wipe out the lingering effects of the "Great Recession" and create opportunities for the future? No, says a leading Canadian economist.
"The End of Growth" is a recent bestselling book by Jeff Rubin. In it, he forecasts lots of cloudy days ahead. But there may be some silver linings.
Rubin was the chief economist at CIBC World Markets for 20 years. His vast understanding of the world economy led him to write his first book in 2009, "Why Your World is About to Get a Whole Lot Smaller." That book was about why $100 oil was going to end our globalized economy. (Think of Canadian stores no longer filled with stuff from China!)
Banks don’t want to raise any doubts about globalization. So Rubin had to quit his job at CIBC to publish the book. That was a good thing for all of us. Instead of his insights being reserved for just the bank’s clients, we can get them, too.
Rubin skewers conventional beliefs of the economics profession. Chief among them is the importance and benefit of economic growth, which Rubin says is "stamped into an economist’s DNA." This belief in growth permeates our society, regardless of where citizens are on the political spectrum. But economic growth cannot continue, Rubin says, because we are already into the time of "peak oil" — when oil production has peaked. The idea of peak oil is dismissed by regular economists because they want us to think that we still have lots of cheap oil.
And although there is still much oil in the ground, it will be increasingly expensive. As the world uses more oil, it costs more to bring it to market. Ten years ago, the world was consuming about 75 million barrels of oil per day. Oil was around $30 per barrel. Now, however, the world is consuming 90 million barrels per day. Oil is $100 per barrel. "Peak oil is really a demand phenomenon rooted in economics, not geology." Oil at $100, Rubin says, acts as a "speed limit" on growth. "We’re about to face a permanent slowdown in growth."
The end of growth means that the debt being racked up worldwide today cannot be paid off in the future from growing economies. On that note, Rubin predicts that countries like Portugal, Italy, Ireland, Greece and Spain will continue to be in dire straits. All of them, he says, are going to leave — or be kicked out of — the Euro zone. (And here in Canada, the federal government and every province except Saskatchewan is currently running a deficit. We are banking on future growth to bail us out).
Rubin is refreshingly politically incorrect. Instead of saying "oilsands," for example, he uses "tarsands." No proper banker would use the latter term, but it does more accurately describe the difficulties and costs of that source of oil.
Rubin is readable and thought-provoking. "Whether we’re ready for it or not, a world of static economic growth is almost here. The biggest question is how well we deal with it." There can be advantages, however, to the end of growth. One is that consuming less oil could result in less climate change. Another is that the end of growth can open up new horizons for human fulfilment, beyond the constant rat race of always consuming more.
Rubin is hopeful that somehow we can successfully adapt. Along the way, there will be new understandings and ways of living in the new economy.
"We can still shape the future we want, but only if we’re willing to relinquish the past we’ve known," Rubin concludes. "As the boundaries of a finite world continue to close in on us, our challenge is to learn that making do with less is better than always wanting more."
Pretty interesting stuff from a banker!
» David McConkey is an active citizen. Contact him and read previous columns at davidmcconkey.com.
Republished from the Brandon Sun print edition August 19, 2013