http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A377945

Living in a state of exponential delusion

Why is it that our planners and politicians understand so little of basic mathematics and its implications? Let me explain how serious the consequences of not understanding some basic mathematical concepts can be. Let us take economic growth, the basic premise of conventional economics, and the assumption that without it our economic model falls apart. It is important that we understand the implications and consequences of this assumption. To understand the implications, we need to understand the underlying exponential mathematics.

Exponential growth refers to a situation where there is constant growth. It doesn’t matter what the rate of growth is, only that it is constant. For example, our current economic strategy is aimed at achieving 6% growth over a sustained period of time. What 6% growth means is that we will be doubling the size of our economy in roughly the next 11 years.

Let’s look at little further afield. China and India are both growing at a rate of about 10% per year. So, their economies are doubling every seven years. Some might argue that this is growth off a low base, but each of these countries has a population of more than 1-billion people, so absolutely their consumption is enormous, even if per capita it is less than ours right now. Both of them will in the next seven years consume more than they have during their entire histories. Is it any wonder that most of the world’s steel, coal, cement and other critical resource are on ships heading east?
Which brings me to the obvious rhetorical question: for how long can this be sustained? I haven’t done any research into world steel resources, and production, nor have I done any research into the same for cement, but I have done a lot of research into world oil reserves and oil production. One thing is crystal clear: we are going to have to face up to oil production reaching its peak within a few years, and also the dramatic way in which this is going to affect all of our lives. Oil is deeply embedded in just about everything we take for granted. That flight across the ocean to visit a family member living abroad, that new SUV that has just been released, the mange tout on your plate just flown in from Kenya, can no longer be taken for granted.

Very soon we are going to have to face up to the very short life of globalisation. The inevitable decline in oil production will bring with it restricted mobility, and a far more localised way of living. Work, schools, social services, medical care will all need to be close to where we live. Sustainable neighbourhoods are going to need to be connected with good, reliable public transport. We need to begin planning at every level of government, in every sector of the economy, in every town and in every village for this. It is not a matter of if, it is a matter of when.

This is not a fantasy. What is a fantasy is the idea that finite resources can defy physical laws and last indefinitely. Yes, we are rapidly approaching the time when economic laws will be confronted head on by physical and mathematical laws...........