America’s economy is dematerializing

October 22, 2019

By Gerhard Ottehenning

WASHINGTON, D.C. — 30 years ago, a full page Radio Shack advertisement listed 15 items with a total value of $3,054.82 — or roughly $5,750 today. Of the 15, only two haven’t been replaced by smartphones (unfortunately there’s no app for Tiny Dual-Superhet Radar Detectors). Integrating all of these appliances into a single item not only saves consumers thousands of dollars, it also results in the use of less natural resources by the economy as a whole. Jesse Ausubel, Director of the Program for the Human Environment at The Rockefeller University, said that since the 1970s in the United States, “a decoupling is occurring so that our economy no longer advances in tandem with exploitation of land, forests, water and minerals.” 

From approximately 1900 to 1970 the U.S. economy grew at a rapid clip with total resource use increasing correspondingly. “We just had this kind of Cookie Monster Economy…and, it’s really understandable why people would start blowing the whistle really hard around 1970, and saying, ‘Gang, we cannot keep doing this,’” said Andrew McAfee, a Principal Research Scientist at the MIT Sloan School of Management. The clarion call of the environmental movement ultimately led to the creation of the Environmental Protection Agency (EPA) and the passage of a number of laws protecting wildlife and limiting the emission of pollutants. 

Though the U.S. economy is roughly 21 times larger today as compared to the economy of 1970, the relative — and in many cases, the absolute — quantity of resources consumed has actually diminished. Between 1980 and 2018, the EPA reports that “total emissions of the six principal air pollutants dropped by 68%.” Agriculture constitutes the largest use of land in the U.S., with corn outstripping every other crop combined in terms of land use. Since the 1940s, American farmers have quintupled yields of corn while using the same or less land. Crucially, Ausubel says, “rising yields have not required more tons of fertilizer or other inputs. The inputs to agriculture have plateaued and then fallen — not just cropland but nitrogen, phosphates, potash, and even water.” 

With less land required to grow the same amount of food, much of the marginal agriculture land is returned to nature. This transition began in 1900 when states such as Connecticut went from being primarily wheat fields and pasture land, almost completely denuded of trees, to densely forested land. Measured by area, the total land reverting back to forest has been growing since 1990. This phenomenon is not unique to the U.S. A study by geographer Florian Schierhorn found that since the 1990s, an area the size of Poland has been abandoned and reforested within the area of the former Soviet Union. 

The reduction in resource intensity extends well beyond cropland. In the 1970s, there was a fear that the U.S.’s insatiable appetite would strip the planet bare. Instead, Ausubel says, “a surprising thing happened: even as our population kept growing, the intensity of use of the resources began to fall. For each new dollar in the economy, we used less copper and steel than we had used before…America has started to dematerialize.”

Despite this optimism, there exists a profound tension in connection with climate change and environmental costs incurred by unbridled economic growth. However, the connection between the two does not need to be zero-sum, says Andrew Blake, a second year Southeast Asia concentrator at SAIS. “Because climate change is a global phenomenon, the U.S. has [an] incentive to assist in the development of green technologies abroad. Technology transfers and investments in green technology in industrializing countries not only promotes economic growth, but allows for sustainable growth with long term dividends for the global economy.” 

While noting that “climate change is real. And it’s bad. And the range of bad is somewhere between bad and catastrophically bad,” Mcafee said, “My great frustration is that we have…something close to a silver bullet in our policy toolkit and our economics toolkit…and we’re not using either of them.”

Mcafee strongly supports the use of market mechanisms, such as a revenue-neutral carbon tax or cap-and-trade, to regulate carbon emissions. Together with a mix of regulatory and technological changes, a similar system saw sulphur dioxide emissions reduced by approximately 80% between 2005 and 2014. Ausubel cites the potential to turn an area the size of Iowa into a wildlife refuge  by eliminating corn cropland dedicated to ethanol production for use in cars. 

For Mcafee, the implications for the rest of the world are that “we have to help the rest of the world get rich. That will bring them past that hump of maximum exploitation of the planet.” Blake agrees, stating that “the onus is on high-income countries to help incentivize the developing world to adopt policies and instruments that can mitigate the carbon emission-filled growing pains of industrialization.”