The Limits to Growth
by D.H. Meadows et al,
New York, 1972.
IN 1970, the Club of Rome, a group of some 70 internationally-known public men, founded by an Italian management consultant, Aurelio Peccei, commissioned two MIT professors, Jay Forrester and Dennis Meadows, to prepare a report on "the predicament, of mankind". The Forrester-Meadows report was published in 1972 under the title The Limits to Growth.
It has strong claims to be regarded as the book with the most pernicious influence on the world in recent times, and that for two reasons. Firstly, it gave an aura of scientific respectability to already widely prevalent irrational "doomsday" versions of environmentalism. Secondly, its prediction that the world would run out of oil encouraged the OPEC cartel of (mainly Middle Eastern) oil-producing countries to raise the price of oil three-fold in the two oil shocks of 1973/74 and 1979180, with calamitous consequences for the world economy.
Forrester, a distinguished scientist, had developed his "system dynamics" into a set of equations for a world dynamics model. The contribution of Meadows and his team was to put flesh on this skeleton by feeding into the computer a vast array of rather hastily-assembled statistics. The conclusion of the book was that "if present growth trends in world population, industrialisation, pollution, food production, and resource depletion continue unchanged, the limits to growth on this planet will be reached within the next hundred years".
Critics soon pointed out two fundamental flaws in the Forrester-Meadows analysis. The first lay in the concept, meaningless to economists, of "finite" resources. Investment in capital and advances in technology have throughout modern history created new resources. The second is that the model contained no adjustment mechanisms of any kind, past behaviour of variables being extrapolated unchangingly into the future. Failure to take account of stabilising feedbacks through the price mechanism. and through socio-political action completely vitiated the predictions. The higher the price of any mineral or other natural resource, as demand rises relative to supply, the larger is the volume of (lower-grade, less accessible) reserves which it is economic to exploit, and the greater the incentive to turn to or develop substitutes, and therefore the larger the world's total known reserves for economic purposes. The world's estimated reserves of crude oil are now three times as large as those on which Forrester and Meadows based their 1970 forecast of exhaustion by the end of the century.
It would be wrong to give the Forrester-Meadows book all the blame for the environmentalist epidemic. This had begun before 1970, part of the intellectual mood of disillusion about material progress and revolt against the existing social order among sections of Western public opinion in the late 1960s, and charlatans like Ehrlich and Suzuki would no doubt have kept it going. But its influence was very great because it allowed popular prejudice to claim scientific support.
The OPEC oil shocks would not have happened without the Forrester-Meadows projections, and the damage to the world economy was enormous. In the main oil-importing countries, the need to finance a greatly increased import bill led to dramatic increases in money supply which became "petro-dollars" in the hands of Saudi Arabia and other OPEC oil-producers. Flooded with these funds, US and European banks enticed Latin American and other developing countries to borrow recklessly. The Forrester-Meadows book was indirectly responsible for the great world-wide inflation and debt crisis of the 1970s and early 1980s. The subsequent collapse of the price of oil in the mid-1980s contributed to the balance of payments crises in Indonesia and other oil-producing countries, and the volatility of the oil price which has only gradually subsided played a significant part in the political upheavals in the Middle East.
Not many books can take credit for such world-shaking events.
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