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Ways of the World

Carol Stone, business economist & active Episcopalian, brings you "Ways of the World". Exploring business & consumers & stewardship, we'll discuss everyday issues: kids & finances, gas prices, & some larger issues: what if foreigners start dumping our debt? And so on. We can provide answers & seek out sources for others. We'll talk about current events & perhaps get different perspectives from what the media says. Write to Carol. Let her know what's important to you:

Saturday, April 25, 2015

Earth Day and the Industrial Revolution in 3 Graphs

It's Earth Day.  Or it was three days ago.  But what we write is still relevant to the season.  In any event, why would we begin with a picture of world population growth?  Well, the number of people on Earth should have an obvious connection to Earth Day.  But the key to the immediate connection we want to highlight is the blue line in the graph showing the beginning of the Industrial Revolution.  A neighbor of mine, a gentleman who's fairly in-the-know about economic issues, stopped me on the street the other day to ask if I understood how much difference the Industrial Revolution made to the world's population.  He had just learned this, he explained, in an online course he had taken, and he was stunned.  So I figure if Steve is stunned, maybe some of you are too.  So here's some of the story and why we pay particular attention on Earth Day.  It's not just the numbers of people, but their standards of living that matter.

The key is the bend in line.   The world's population was basically flat from the year 1 A.D. to 500 A.D. at about 200 million people; estimates show that by 1000 A.D., it was still no more than 250-300 million.  Population reached about 500 million by 1500 and 1 billion in 1800.  Now, just 215 years later, there are about 7.2 billion people.  The addition of the last half of that, 3.6 billion, has taken only 45 years.  So clearly some very dramatic things happened around and after 1800.

We often think of the Industrial Revolution in terms of the cotton gin and other machinery, but advances in health care and public facilities are also important.  As examples, Edward Jenner's small pox vaccine came in 1798.  John Wilkinson, an Englishman, developed the iron pipe that made a new water supply system in Paris in 1786.   John Snow realized in 1854 that contaminated water could contribute to the spread of cholera.  Before this period, life expectancy at birth hovered around 24 years in the medieval period and got to 35 in England by the mid-18th Century.  By 1900, it reached the late-40s and was about 80 years in 2010.  In other words, death rates declined markedly.  This is so all over the world.

At the same time, birth rates have also declined.  This latter factor has been pronounced enough that population growth rates have actually moderated in recent decades.  Big as the numbers are, they are no longer accelerating.

Robert Lucas, a consulting economist to the Minneapolis Federal Reserve Bank, has written about these birth and death rate trends.  As the Industrial Revolution took place, along with accompanying gains in agricultural output and the improvements to health, population did expand dramatically.  The gains in production supported the population growth.  Thomas Malthus and other economists of his day – around 1800 – began to fear that this population growth trend would consume much of the earth's resources, leading to increased poverty.  While there is quite justified concern over that eventuality, Lucas offers some mitigating notions.

At the outset of the industrial and agricultural revolutions during the 18th Century, most of society was agricultural, and as farmers obtained larger yields for their crops and had healthier animals, they used their increased income to enlarge their families, so they could produce bigger crops still.  Living standards – income per person – thus didn't change much at first.   From 1700 to 1820, world GDP firmed from 0.2% growth per year to about 0.5%.  But population had almost the same movement, so each person was associated with about $665 worth of output in 1820, only mildly larger than the $596 in 1600.

But starting around 1820, that relationship shifted.  Those health improvements we mentioned before, clean water and similar improvements to sewage disposal, made conditions much better in cities and people began moving to them and doing more industrial work.  This coincided with diminishing birth rates, enough so that total production gains were associated with more production per person; by 1900, that had nearly doubled to $1,260.  By 2008, the latest year for which we have this specific calculation, world output per person was just over $7,600, as seen here.

We're writing about all this because it's Earth Day.  What is the connection?  As the line in the above graph was moving definitively higher in the early 1960s, a marine biologist named Rachel Carson published Silent Spring, a book that grabbed everyone's attention about how more people were using more of the earth's resources, much of that in an ironically unhealthy way.  For the first time, many people came to understand that they could not just plow ahead unconcerned about what they were doing to the earth and its environment.  Would this new realization slow growth?

It took some time, but progress in making the right use of the earth is taking place.  Robert Lucas, in the material we reference here, counters some environmental naysayers' arguments by highlighting the role of technology.  He points out that we should use a theory of economic growth that embodies not just numbers of people and amounts of consumption, but the application of technology, ingenuity and adaptability.

This notion prompted us to check out the amount of energy used in producing today's GDP compared to some historical period.  If GDP growth just uses more and more energy resources, then the naysayers will be right; succeeding generations of people will indeed be less well off because pure air, clean water and all kinds of material resources will be scarcer for everyone.

What we found with some brief searching, is just 20 years' worth of information on this.  But it tells a positive, hopeful story.  Data from the World Bank show that a fixed unit of energy would yield $5.40 of world GDP in 1990.  By 2010, the same amount of energy made $7.20 of GDP. 

Further, in 1990, each dollar of GDP was associated with 0.5 kilogram of carbon emissions, but in 2010, this had fallen to 0.4 kilogram.  Energy use per person has increased for the world as a whole, but this is happening in middle income regions in Asia, the Middle East and northern Africa, not in high income regions.  In fact, in many places per capita energy use has gone down; in the U.S., for example, each person used 7,700 kilograms of energy in 1990, but just over 7,000 kilograms in 2011.

So perhaps Lucas is correct.  If we know and understand a situation, we can quite probably find ways to deal with it.   Thus, growth can continue to the extent that we become more efficient in using energy, and we can even develop new energy sources and/or improve the way we manage current sources.  We can further reduce pollution without severely restricting our general ways of life.  This isn't automatic, and we have to be mindful and deliberate in our efforts, but we have a good shot at continuing to improve our lives and the life of the Earth itself.

Robert Lucas.  "The Industrial Revolution: Past and Future." Federal Reserve Bank of Minneapolis, Annual Report Essay, 2003 Annual Report, published May 1, 2004.  Accessed April 24, 2015.

Eric McLamb.  "The Ecological Impact of the Industrial Revolution".  Ecology Global Network.  September 18, 2011.  Accessed April 24, 2015.  Also see McLamb's Earth Day commentary from 2014: "Earth Day and the Human Revolution"  Accessed April 24, 2015.

Long-term historical data on population and world GDP are based on Angus Maddison, The World Economy: A Millennial Perspective.  Paris, France: Organisation for Economic Co-operation and Development.  2001 and 2006.  A pdf may be purchased or the book may be read in an e-book format on that site.  Barnes & Noble and Amazon also have it available.

Maddison was professor at the University of Groningen from 1978 to 1997 and a founder of the Groningen Growth and Development Centre.  He passed away in 2010.  His data are recognized as the primary compilation of long-term world-wide GDP and other economic and demographic indicators; they are now maintained and made available in spreadsheets on a site managed by his colleagues at that research center

Data on the relationship of energy to GDP, energy use per person and carbon emissions come from the World Bank's World Development Indicators.  The 2015 edition of these was published just on April 14, 2015, and includes these energy data through 2011.  See "Energy production and use" and "Energy dependency, efficiency and carbon dioxide emissions".  Accessed April 24, 2015.

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