In my last few posts I’ve been looking into the relationship between economic growth and environmental sustainability. Can we find a healthy balance between them? Or are they fundamentally at odds?
Well a couple of weeks ago I was listening to the a16z podcast during my morning run on the treadmill when I heard Kevin Kelly interviewing Marc Andreessen on this very subject.
Some background: Marc Andreessen co-wrote the original web browser called Mosaic and then went on to found the company Netscape. These days he runs a Silicon Valley venture capital firm called Andreessen Horowitz also known as “a16z”. Kevin Kelly is a founding editor of Wired magazine.
The interview took place at the annual a16z Summit on December 12, 2019, in a session called Why We Should Be Optimistic About The Future. Together, Andreessen and Kelly explore a wide range of subjects including the issue of economic growth.
Here’s the relevant portion starting at 34:17, which I’ve transcribed from the audio with some “light editing” for readability.
Kelly: Capitalism so far has depended on growth, and growth is something that VCs pay attention to. But we’re now wondering what’s the minimum amount of growth that you might need to have prosperity? Can you have prosperity with low growth? Can you have prosperity with fixed growth? Do you have any insights about that at the civilizational scale?
Andreessen: Yes. I’d say the issue is even more intense these days because there’s now very prominent people in public life arguing that growth is bad, that in fact it is ruinous and destructive and that the right goal might actually be to have no growth or to actually go into negative growth. Especially a very common view in the environmental movement.
So I’m a very strong proponent, a very strong believer that growth is absolutely necessary. And I’ll come back to the environmental thing in a second because it’s a very interesting case of this.
I think growth is absolutely necessary. I think the reason growth is absolutely necessary is because you can fundamentally have two different mindset views of how the world works. One is positive-sum, which is a rising tide lifts all boats. We can all do better together. And the other is zero-sum, where for me to win somebody else must lose and vice versa.
The reason I think economic growth is so important at core is because if there is fast economic growth then we have positive-sum politics and we start to have all these discussions about all these things that we can do as a society. And if we have zero-sum growth, if we have flat growth or no growth or negative growth, all of a sudden the politics become sharply zero-sum. And you see this if you track the political climate. Basically, it’s the wake of every recession. In the wake of every economic recession the politics just go seriously negative in terms of thinking about the world as zero-sum. And then when you get a zero-sum outlook in politics that’s when you get anti-immigration, that’s when you get anti-trade, that’s when you get anti-tech. If the world’s not growing then all that’s left to do is to fight over what we already have.
And so my view is you need to have economic growth. You need to have economic growth for all the reasons that I would say right-wingers like economic growth, which is you want to have higher levels of material prosperity, more opportunity, more job creation, all those things.
You want to have economic growth for the purpose of having sane politics; like a productive political conversation.
And I think the kicker is you also want economic growth actually for many of the things that left-wing people want.
One of the best new books this year, Andrew McAfee has written a book called More From Less. It’s actually a story of a really remarkable thing that a lot of people are missing about what’s happening with the environment which is globally carbon emissions are rising and resource utilization is rising. In the US, carbon emissions and resource utilization are actually falling. So in the US we have figured out to grow our economy while reducing our use of natural resources which is a completely unexpected twist to the plot. If you listened to environmentalists in the ‘60’s and ‘70’s, nobody predicted that.
It turns out, he talks about this in the book, but it turns out basically what happens is when economies advance to a certain point they get really, really good at doing more with less. They get really, really good at efficiency. They get really good at energy efficiency. They get really good at use of environmental resources. They get really good at recycling in lots of different ways. And then they get really good at what’s called dematerialization, which is what is happening with digital technology, which is basically taking things that used to require atoms and turning them into bits, which inherently consumes less resources.
And so my view on environmental issues is you’ve got a global problem which is you have too many people in too many countries stuck in mid-industrial revolution. They’ve got to grow to get to the point where they’re in a fully digital economy, like we are, precisely so that they can start to have declining resource utilization.
The classic example is energy. A huge problem with emissions and with health from emissions is literally people burning wood in their houses to be able to heat and cook. What you want to do is go to hyper-efficient solar or ideally nuclear. You want to go to these super-advanced forms of technology.
By the way, if you want a big social safety net and all the social programs, you want to pay for that stuff, you also want economic growth because that generates taxes that pays for that stuff.
Growth is the single biggest form of magic that we have to be able to actually make progress and hold the whole thing together.
* * *
Andreessen makes one of the clearest statements I’ve ever heard about the benefits of economic growth. Three points stand out for me:
- Zero-sum politics really suck. “If the world’s not growing then all that’s left to do is to fight over what we already have.” I’ve seen this myself at companies where growth has stopped. The fights get personal and vicious. At the international level they can lead to war. We need economic growth to have sane politics.
- There are billions of people on the planet, and more being born every minute, who want and deserve the kind of safe, healthy, prosperous lives we enjoy today in the so-called developed world. Economic growth is the best way we know of for achieving that.
- Economic growth can lead to more efficient energy and resource utilization and to innovative new technologies that bring environmental benefits.
There are some things I disagree with here too, or perhaps more accurately a couple of things Andreessen doesn’t talk about.
First, you can have solid economic growth and still have lots of debate about income and wealth distribution. Even with the growth since the Great Recession, there is legitimate concern that income and wealth distribution are seriously out of balance and that the global economy has become way too unfairly tilted in favor of the wealthy. Arguably, this is one factor that led to the election of Donald Trump. Hardly an indicator of sane politics. To put it another way, the rising tide seems to be leaving many boats at the bottom these days.
Second, on the environment, Andreessen is essentially arguing in support of something called the environmental Kuznets curve (EKC). This is the idea, named after the economist Simon Kuznets, that as an economy develops, environmental degradation will increase as consumption increases, but once a certain level of prosperity has been reached, people become more concerned about the environment and demand improvements from both governments and corporations. It’s a nice idea – growth solves pollution – but the evidence is mixed and the whole idea is, as they say, highly contested. Even if growth and innovation do bring some environmental benefits, we can’t assume they will automatically cure all environmental problems, and to be fair I don’t think Andreessen is making that claim. But further, we do not know if we can have growth within environmental and social boundaries like the “safe and just space for humanity” that I wrote about in a previous post.
Regardless of these points, the whole podcast is well worth listening to. Andreessen and Kelly are both really smart and really insightful observers of our evolving tech economy that, in important ways, they’ve both helped to create.
P.S. To Marc, Kevin & Sonal Chokshi (a16z podcast host), I hope I’ve done justice with my transcription. If there’s an official version I can link to, or if you want to suggest corrections, please leave a comment. Thanks.
My review of More From Less by Andrew McAfee