A Changing World

There are two schools of thought about economic growth. Strongly desired by some as a means of righting the debt-laden ship of state, others regard it as a deluded notion from which we must free ourselves as quickly as possible. Forty years after the Club of Rome's study The Limits to Growth became the manifesto of the environmental movement, antipathy to economic growth is making a comeback. The unsustainable burden it places on the environment, modern civilization's insatiable appetite for energy and the growing discrepancy between resource consumption and limited reserves of raw materials are fueling calls for a postgrowth society. Other commonly encountered motifs include weariness with a life devoted to consumption, laments over permanent pressure to perform and the ubiquitous acceleration of life, a feeling of helplessness toward financial markets gone wild and growing middle-class uncertainty in the face of a new period of economic hardship that demands more effort in return for less security. Recent surveys show that the majority of Germans do not connect the term "prosperity" with material improvements in their standard of living, but with a life free from worries about unemployment, old age and illness. The more uncertain the future appears, the more important qualities such as certainty and security become. Fewer and fewer people still believe that future generations will be better off. When the idea of progress through growth loses traction, questions of distribution take center stage.

Does the crisis raging in the financial markets prove right all those who predict that growth has had its day? Growth financed by debt, i.e. the constant debt-based expansion of government spending and credit-funded housing booms such as those that have had such an impact on the US and Spanish economies, has certainly hit the wall. The idea that we can maintain perpetual income and job growth by taking on more and more debt has proven to be insane. Throughout much of Europe a slowing economy and reductions in state benefits are having a negative impact on the standard of living of broad sections of the population. Demographic change is further strengthening this trend: a dwindling number of working-age citizens is having to bear increasing health care costs. So will growth soon be a thing of the past? Is the seemingly interminable effort to squeeze more and more from evanescent resources coming to an end? Is the oversaturation of the markets causing capitalism to flag? Is the global Monopoly game winding up as more and more people refuse to join in?

It seems unlikely. There is no end to growth in sight. On the contrary. We must not let the financial crises of recent years obscure the fact that the global economy is in the middle of a historic growth phase driven by four basic factors:

• Firstly, the global population is expected to grow from just over seven billion today to at least nine billion by the middle of this century. Even though rising prosperity, better education and greater self-determination for women are causing demographic growth to level out, this increase is inevitable thanks to the high birthrates of generations that have already come into the world. At present the global population is growing by an amount equivalent to the population of Germany — a little over eighty million people — every year, with the greatest demographic growth taking place in Africa: by 2050 there will be more than twice as many people living there as there are today. That alone will drive up demand for food, goods and services of all kinds.

• Secondly, the global labor force, which today amounts to around three billion people, is set to almost double by the middle of the century: every year umpteen million young, energetic people are crowding into the job market, looking for productive work. To put it another way, the growing demand for goods is being accompanied by increased manpower potential. In China alone the working population is going to increase by approximately two hundred and fifty million people over the next two decades — an increase greater than Europe's total current manpower potential.

• Thirdly, we are at present witnessing billions of people strive with all their might for a share in the spoils of modern civilization: homes with running water and electricity, a plentiful supply of food, household appliances, medical care, education, computers, cell phones and transportation. They aren't concerned with the question of how much is enough; they work hard and invest in their children's education in order to escape poverty and gain access to things we take for granted. The momentum of billions of people playing catch-up is a powerful force for growth capable of transcending any economic crisis. The global middle class is going to grow rapidly in the course of this trend. By the middle of the century the number of people with purchasing power of between $10 and $100 per day is expected to rise from around one billion to four billion. Demand for high-end consumer goods and services will grow to many times the current level as a result.

• Last but not least, the pace of innovation is increasing at a breathtaking rate. While the most recent groundbreaking innovation — the digital revolution — is still in full swing, new waves of innovation are already breaking: renewable energy, electromobility, biotechnology, materials engineering, robotics, nanotechnology and medical engineering — a wide range of new technologies, products and services are making themselves felt. The capabilities of computers are growing rapidly, facilitating research projects on an entirely new scale. High-powered search engines and information networks allow worldwide access to all the data anyone could want. The boundaries between scientific disciplines are becoming blurred; new knowledge is being generated in interdisciplinary networks and the production of knowledge is being globalized. Never before have there been so many scientists working on new ideas and projects in so many countries. The Asian emerging nations in particular are constantly expanding their capacity for innovation. Within the last five years Chinese applications to the European Patent Office have increased fivefold. According to the president of the Patent Office, Benoît Battistelli, at this rate China will oust Germany from third place within a few years (the United States currently holds the top spot, followed at some distance by Japan and Germany): "We can no longer say that China is merely the world's factory: it is positioning itself to become the world's research laboratory too."

China as a Forerunner

The new economic miracle is primarily a phenomenon of the emerging nations, which are undergoing the process of industrialization in fast forward and causing a dramatic shift in the balance of the global economy. Owing to their growth dynamic, the newly industrialized countries are together expected to account for around two-thirds of gross world product by 2030. In contrast, Europe's share is going to shrink drastically. Extrapolating from current economic and demographic trends, the American economic historian Robert W. Fogel has projected that come 2040 the 15 Western European EU countries, which by then will account for only 4 percent of the world's population, will be generating about 5 percent of GWP. The US, with 5 percent of the population, will be generating 14 percent, and with 17 percent of the global population China will have reached no less than 40 percent of GWP. Linear projections such as these should of course be taken with a grain of salt, but they illustrate a process of economic continental drift that is going to fundamentally alter the world's political architecture. And there is in any case nothing very bold about the prognosis that China is likely to overtake the US as the world's largest national economy before the end of the current decade. The Berlin-based social scientist Helmut Wiesenthal points out that from the perspective of world history this development is not particularly sensational: In rising to economic dominance, both China and India are returning to positions they occupied right up to the beginning of the nineteenth century. Prior to the Industrial Revolution they were the two largest economies in the world. Now they are reconnecting with a proud history that never vanished from their collective memories. In some respects this is also true of Turkey, as the successor to the Ottoman Empire. It is the only European borderland capable of keeping pace with the other emerging nations. Even during the financial crisis of 2011 the Turkish economy grew by an impressive 8.5 percent.

The societies of Asia, Latin America and Africa are just starting to catch up, having long been peripheral players in the global market. For the vast majority of people that was an unenviable position to be in — cut off from education and health care with no prospect of social mobility. The Asian tigers were the first to break the vicious circle of poverty: South Korea, Taiwan and Singapore led the way, followed by Malaysia, Thailand, the Philippines, Indonesia and Vietnam. Since the 1980s China has taken on the role of global growth locomotive. For 30 years the Chinese economy has been expanding at an annual rate of 8 to 10 percent. Not even the most recent global financial crises have managed to slow its self-perpetuating dynamism. The country's formidable rise is being driven by an extravagant investment ratio that has risen from around 30 percent at the beginning of the 1970s to over 40 percent today — approximately twice the level of Germany or the US. A high investment ratio means expanded production capacity and modernized infrastructure, but also investment in educational institutions and the constant growth of a society's skilled labor force, accompanied by an increase in its potential for innovation. China is swiftly progressing from imitation mode to innovation mode. In 2012 there were three times as many people employed in research and development there as in Germany, and the gap will continue to grow. Judging by its technological standards, its diversity and its capacity for innovation, the Chinese economy is not only growing is size, but also in quality. This development has been accompanied by a massive increase in national income. Income per capita has risen at an annual rate of around 8 percent over the last 30 years. Despite glaring inequality in the distribution of wealth, this has led to unprecedented improvements in the circumstances of hundreds of millions of people who have risen from bitter poverty to modest prosperity.

For environmental as well as demographic reasons China must make the transition from extensive to intensive growth soon. The effects of its one-child policy will soon catch up with it. The Chinese birthrate is approximately 30 percent below the mark of 2.2 children per woman required for stable population development, and the country's demographic development will likely reach a turning point before 2030. After that the labor force will shrink over time, while the number of elderly people will rise rapidly. The US Census Bureau estimates that within the next 20 years the over-65 age group will swell from 115 million to approximately two hundred and forty million people. China's demographic structure is becoming more like Europe's, albeit at a much lower level of prosperity. Western Europe got rich before it got old. China is threatening to get old before it can get rich, which is why its political leaders are doing all they can to alter the nature of its growth by increasing productivity and enhancing the country's capacity for innovation. This is good news from an environmental perspective because it will make the Chinese economy less resource intensive in the medium term.

Up to now China's CO2 emissions have been rising roughly in parallel with the growth of its gross domestic product. They have doubled in the last 10 years and China has overtaken the US as the world's largest CO2 producer. Although its emissions per capita are still well below the level of the old industrial nations, China is catching up quickly in this area too. According to the calculations of the International Energy Agency, its carbon emissions grew by 9.3 percent or 720 million tons in 2011. To put this in perspective, the increase in Chinese emissions was only slightly smaller than the entirety of Germany's CO2 emissions that year. China's economic miracle is predominantly being powered by fossil fuels. The country burns approximately half the coal consumed worldwide. In 2011 its share of global energy consumption was 72 percent, while every week new coal-fired power plants with a capacity of around nine hundred megawatts are being added to the grid. Although for the most part the new power plants are substantially more efficient than old ones, this makes certain levels of future CO2 emissions inevitable. At the same time, China is investing massive amounts in energy efficiency and renewable energy. In 2011 the People's Republic generated as much as 58 gigawatts of wind power — a quarter of the amount produced worldwide. Over one hundred gigawatts of electricity are scheduled to be generated by wind turbines in 2015 and Chinese companies now make up five of the world's ten largest wind turbine manufacturers. The electricity grid is being developed to direct wind power from the sparsely populated regions in the west to the population centers in the east. Today China is also the world's largest producer of solar cells. To date the lion's share of its production has been exported, particularly to Germany, which has become the world's biggest market for solar electricity thanks to guaranteed feed-in tariffs. German electricity consumers have indirectly financed the development of the Chinese solar industry. But following a dramatic drop in the price of solar cells, China has increasingly been generating its own solar electricity. The government has set ambitious goals for improving energy efficiency. Sustainable growth has become an official mission statement. There are concrete economic reasons for this. A substantial share of the country's nominal growth is being gobbled up by devastating damage to the environment and public health associated with the existing development model. Wang Yuqing, former deputy director of the Ministry of Environmental Protection, estimates that in 2011 environmental damage amounted to 5 or 6 percent of GNP — more than half the economic growth for that year. Air, water and soil pollution is jeopardizing drinking water supplies, eroding agricultural production and making people sick. Forty percent of the country's rivers are deemed to pose a health risk. Eight out of ten cities fall below already minimal air quality standards. Drought is spreading and the contamination of soil with heavy metals is increasing.

If China wants to avoid environmental and economic collapse it must alter its growth model, shifting from extensive to intensive use of natural resources, from the ruthless exploitation of people and nature toward a gentler economic system and from the dominance of energy-guzzling industries to stronger growth in the service and high technology sectors. It has a few decades to execute a development that took more than one hundred and fifty years in Europe. At the 18th Party Congress in November 2012 the Chinese leadership declared the preservation of environmental balance to be an urgent priority. Delegates unanimously approved the adoption of a corresponding article into the charter of the Communist Party. According to the declaration, developing an environmentally friendly civilization is a long-term plan of vital importance for the life of the people and the future of the nation that will also serve to make China more beautiful. There is also growing pressure from below to take action against massive environmental pollution. Protests against environmentalplunder are on the rise. In July 2012, for example, the inhabitants of the port city Qidong in eastern China resisted the construction of a pipeline intended to channel wastewater to the sea from a paper factory belonging to the Japanese company Oji Paper located around one hundred kilometers away. The people were afraid that poisonous wastewater would wipe out the fishing grounds they live off. Several thousands took part in the protests. In the course of the disturbance they stormed the headquarters of the city government, destroying computers and overturning tables. The mayor eventually announced on camera that the project had been abandoned.