The American political economy, often described as a “mixed economy,” is a large, complex system that encompasses not only the daily activities of the country’s 300 million inhabitants and the decisions made by the American government , but also, as dependence upon international trade and production increases, the daily activities of much of the world’s population of 6.6 billion and the governments of these populations. There is no way for an individual to gain a full understanding or knowledge of all the workings of such a complicated machine, but economic activity is largely guided by underlying economic, political, and social theories, within which both the aim of the paradigm and the proposed means of accomplishing this aim can be tentatively identified. Through the identification of both the aim and the means of our economic model, a clearer picture of the action and implication of our economic activity can be painted, and in conjunction with the study of other means of economic activity, potential flaws in our model can be exposed and critically examined.
The growth of economy is considered a primary aim amongst most, if not all, nations today, and is considered by both the World Bank and the International Economic Development Council to be the primary means for the reduction of poverty and increase in the standard of living worldwide. The World Bank website reports that it's mission is to "... concentrate on building the climate for investment ... so that economies will grow" ("World Bank Challenge"), and within the bylaws of the International Economic Development Council, it is stated that their objective is to "share tested techniques in stimulating economic growth" (Marinucci 2) . The paradigm of socioeconomic increase as progress dominates the world economy, and the United States is no exception, having the largest gross domestic product, or GDP, in the world, and a GDP growth rate of 3.3% annually (Mannering 7). The United States government also promotes economic development and growth around the world, providing 22.7 billion dollars in development assistance to largely un-industrialized nations (Rollins 9). The private sector within the United States is also eager to provide loans to nations largely devoid of infrastructure, with investments totaling 69.2 billion in 2005. (Rollins 46). The purpose of this transfer of a huge sum of capital is to support economic growth within these areas. Economic growth is equated with progress throughout the world because growth is said to provide poverty relief and an increase in the standard of living for individuals worldwide.
The history of the United States shows the nation’s exemplary achievement in the area of socioeconomic increase, with an increase in GDP per capita from 91 dollars in 1800 to 44,000 dollars in 2006, and a population increase from 3 million in 1790 to 300 million in 2007 (Williamson 2). Large scale, rapid growth such as this was made possible through the process of industrialization. The industrial revolution, which occurred in the late 17th century and early 18th century in Britain and quickly spread throughout the world, was certainly one of the most influential sequence of events on the course of human history. Prior to the industrial revolution, most economies had subsistence standards of living, and the production of surplus was severely limited. Capabilities were not developed that allowed a worker to create large excesses of goods that were not needed for the worker’s own subsistence. The increased mechanization of production through technological development greatly expanded the scope of the economic market.
The introduction of the steam engine brought forth unprecedented growth in production capacity, and improvements in agricultural technology provided a platform for an agricultural market far beyond subsistence living. This trend continues today as the industrial machine moves ahead full steam, spurning an increasing number of goods to be consumed by an exponentially growing population. Rapid production supports rapid growth. The industrial output of the world in 2005 was 14,931,200 million dollars, supporting a population of 6000 million people (World Factbook), whereas a population of 500 million was supported in 1600 without any form industrial output. Today, the industrial sector composes more of the world’s economic output than agriculture (World Factbook), with significant emphasis placed on increasing production efficiency and mechanization in both the United States and globally.
Certainly, an economic theory must be put into practice in order to manage such a gigantic surplus as created by a drastically increased efficiency in production. Certain theories, such as communism, promote that the means of production should be commonly owned. Other theories, such as socialism, promote that the state should control the means of production. Within the United States, the means of production are privately owned. This system, capitalism, is the dominant economic system in the Western world and provides the main means of industrialization of the rest of the world. Capitalism, in the modern industrial sense, arose out of criticism of the mercantilist system for regarding the amount of wealth in the world as constant. Economists such as Adam Smith, influenced by utilitarian philosopher John Stewart Mill, argued that wealth can, in fact, be created. Certainly, it has been, but it has to come from somewhere.
The birth of the United States corresponded closely enough with both the Industrial Revolution and the popularization of the theory of classical economics that it was able to utilize both the powerful production mechanism and the powerful management model as a means for rapid economic growth, and experience unprecedented success.
There is no doubt that the capitalist economic system can yield incredible economic growth when used as a means of managing production surplus. The United States utilizes free-market economic principles, within which the state has no control over the means of production or the distribution and consumption of goods. Although the United States government enacts some restrictions upon these economic activities, individuals are largely granted the ability to conduct transactions without interference from the state. Opposed to command economies, within which the state controls production and distribution, the free market economy allows for individual freedom in economic decision-making.
Nearly all criticisms of an economic system focus on the ownership of the means of production and the the means of distribution of the produced goods. Critics of capitalism argue that a free market results in an unfair distribution of wealth and concentration of capital, whereas critics of communism and socialism argue that both state and communal control of production of goods and goods themselves detract from the freedom of the individual and are inherently unfair. Each of these economic systems, however, serve the same purpose. They all provide a way with which to manage industrial and agricultural production surplus and, in turn, achieve socioeconomic growth. Before examining the potential benefits and flaws of different models of surplus management, the potential benefits and flaws of such a production surplus must be examined to avoid presupposing that economic growth is something that should be aimed for.
Recently, the term ‘sustainable growth’ has been formulated amongst growing ecological concern regarding the unsustainability of the economic growth paradigm. In fact, both Bretton Woods institutions, the World Bank and the International Monetary Fund, issued a joint statement on September 5, 2000, within which their mission was clearly outlined. “Both institutions…share the same broad objective: helping to improve the quality of life and reduce poverty through sustainable and equitable growth” (Wolfensohn, Kohler 3) Sustainable growth, however, is a contradiction in terms and is unable provide a long-term basis for economic improvement. Growth is not only unsustainable because it relies upon increasing resource use, insuring that overall capital decreases over time, but because it radically disrupts ecosystems upon which humans depend.
Economic development harbors an increase in population growth, as seen through the shift from virtually zero population growth before the agricultural revolution to a geometric rate of population increase, and the further shift from geometric increase to exponential population growth during and after the Industrial Revolution. According to the basic principles of ecology, the population of a species is a function of that species’ food supply. The human species possesses the unique ability to determine the size of food supply, and as such, has decidedly increased it’s food supply to provide for the growing numbers of new humans, which feeds population growth in itself. According to Russell P. Hopfenberg, in his article “Human Carrying Capacity is Determined by Food Availability,” states that, “human population dynamics are common to the population dynamics of other species. This means the world’s human population growth is a rapidly cycling positive feedback loop, a relationship between food and population in which food availability drives up population numbers, and increasing population fuels the mistaken impression, the misperception, that food production needs to be evermore increased. The data make clear increasing annual global food production gives rise to growing numbers of human beings” (7).
Since the mid 20th century, world population, fueled by rapid economic growth, has grown by around 2% a year, effectively doubling the population every 35 years. Although some regions, such as Germany and Japan, have lower projected populations in the year 2000, author Daniel Quinn, in “The Story of B” directs us to look at the catastrophic increase within the population system as a whole, rather than country by country (122). Population estimates for 2050 range from 9.2 billion by the United Nations (Zolnick) to greater than 12 billion by Cornell professor David Pimpetel (Pimpetel 316), but many do not see this type of population growth as a problem. For example, Sheldon Richman, the Senior Editor of the Cato Institute, states in his testimony on The International Population Stabilization and Reproductive Health Act, “There is no population problem. Population growth is the result of the plunging death rate and increasing life expectancy worldwide. That is progress.” He goes on to say humans are net resource producers, and that “natural resources do not exist. All resources are man made … People do not deplete resources, they create them” (Richman 3-6).
Statements such as these demonstrate a belief that the economy is a closed system within which people are able to create resources and wealth amongst themselves without input from the environment. The fact remains that our economy is an open system that is entirely dependent upon our environmental resources. All goods produced by man require some sort of naturally occurring material, or resource. All of these resources occur in limited quantities, and many (metals, minerals, water, and fossil fuels) are considered non-renewable. Humans cannot create resources for human use without raw materials, or natural resources. Certainly, economic growth and food production increase, requiring large quantities of resources in itself, allows for rapid population growth. This population growth is then supported with further economic growth and food production increase, requiring an ever-increasing use of finite resources over a shorter period of time, leading to rapid increase of the rate of depletion of raw materials.
Many environmentalists argue that the human species has grown beyond carrying capacity (Hardin 64; Malthus 22), or the equilibrium maximum of our population. Humans, however, have the unique ability of being able to increase this carrying capacity, or limits of our population through various means. One way this has been accomplished is through drastically increased production efficiency. If more consumables can be created in a shorter period of time, more people can exist during that time. This, however, just allows for a short -term increase of carrying capacity, as the means of increase is at the expense of the preservation of our resources for the long run. Increasing production efficiency as a means of expanding our carrying capacity is not sustainable over time. Another way of increasing human carrying capacity is through the development of land for human food production. This has certainly been largely accomplished, although the earth has a limited amount of viable agricultural land, and converting land for human use has large ecological ramifications including habitat destruction leading to species extinction and decreasing diversity within the biological community. Indeed, the State of the World report for 1998 reports that, “In regions where forest degradation and conversion have been most intense … on average 70 percent of the endemic primate species face extinction” (Brown 47). Increased land development is also not a sustainable means of growth. A third way of expanding our carrying capacity has been increased agricultural output, primarily through mechanization or processes such as fertilization that utilize industrial production methods in their creation. This process, however, is also unsustainable as increased industrial output is required for increased mechanization or even fertilization and pesticide use. An increase in the rate of use of raw material is still required for a carrying capacity increase of this nature.
All increase in carrying capacity relies upon increasing finite resource use, which is mathematically unsustainable.
Economic growth occurs at the expense of the global ecosystem and is an unsustainable model. The 1972 Limits to Growth report to the Club of Rome demonstrated that perpetual growth in consumption of non-renewable resources is an impossibility, through the consideration of the exponentially increasing factors of world population, industrialization, pollution, food production, and resource depletion (Meadows 12-16). This perpetual growth trend in consumption has been undergone since the Industrial Revolution, and continues to be promoted by the United States and other industrial nations to the non-industrial or developing world. By promoting an unsustainable model of socioeconomic growth both at home and abroad, the United States largely ignores the vast ecological ramifications of such a model on both our species and our ecosystem.
If action is not taken to reverse this global growth trend, humanity may soon find itself on the brink of extinction. It will be difficult for all persons existing within the current paradigm, and certainly difficult for the state, to look past the allure of further industrial and agricultural development and growth and towards a paradigm of a sustainable future, but the end result of continued growth is certainly catastrophe. A sustainable model of economics within ecology and outside of industrial production must be encouraged in order to ensure the survival of our species, allowing future generations of human inhabitants to enjoy this beautiful place we call home.