07 June 2022 – Fifty years ago, Italian business leaders in the Club of Rome gave a jolt to the world in their path-breaking report The Limits to Growth. That thought leadership continues today as Italian business leaders launch Regeneration 2030, a powerful call for more holistic, ethical, and sustainable business practices to help the world achieve the Sustainable Development Goals (SDGs) and the Paris Climate Agreement. The 50-year journey from The Limits of Growth to Regeneration 2030 shows how far we have come in understanding the critical challenges facing humanity, but also how far we still have to go to meet those challenges.
The half-century since The Limits to Growth also defines my own intellectual journey, since I began university studies at Harvard University exactly 50 years ago as well. One of the first books that I was assigned in my introductory economics course was The Limits to Growth. The book made a deep and lasting impression on me. Here for the first time was a mathematical simulation of the world economy and nature viewed holistically, and using new systems dynamics modeling then underway at the Massachusetts Institute of Technology (MIT).
The Limits to Growth warned that compound economic growth was on a path to overshoot the Earth’s finite resources, leading to a potential catastrophe in the 21st century. My professor huffily dismissed the book and its dire warning. The book, the professor told us, had three marks against it. First, it was written by engineers rather than economists. Second, it did understand the wonders of a self-correcting market system. Third, it was written at MIT, not at Harvard! Even at the time, I was not so sure about this easy dismissal of the book’s crucial warning.
Fifty years later, and after countless international meetings, conferences, treaties, thousands of weighty research studies, and most importantly, after another half-century of our actual experience on the planet, we can say the following. First, the growing world economy is indeed overshooting the Earth’s finite resources. Scientists now speak of the global economy exceeding the Earth’s “planetary boundaries.” Second, the violation of these planetary boundaries threatens the Earth’s physical systems and therefore humanity itself. Specifically, humanity is warming the climate; destroying the habitat of millions of other species; and polluting the air, freshwater systems, soils, and oceans. Third, the market economy by itself will not stop this destruction. Many of the most dangerous actions – such as emitting climate-changing greenhouse gases, destroying native forests, and adding chemical nutrients to the rivers and estuaries – do not come with market signals attached. Earth is currently treated as a free dumping ground for many horrendously destructive practices.
Twenty years after The Limits to Growth, in 1992, the world’s governments assembled at the Rio de Janeiro Earth Summit to adopt several environmental treaties, including the UN Framework Convention on Climate Change (UNFCCC) and the Convention on Biological Diversity. Twenty years later, in 2012, the same governments re-assembled in Rio to discuss the fact that the environmental treaties were not working properly. Earth, they acknowledged, was in growing danger. At that 2012 summit they committed to establish Sustainable Development Goals (SDGs) to guide humanity to safety. In 2015, all 193 UN member states adopted the SDGs and a few weeks later signed the Paris Climate Agreement to implement the 1992 climate treaty.
In short, we have gone a half-century from the first warnings to today. We have adopted many treaties and many global goals, but in practice, have still not changed course. The Earth continues to warm, indeed at an accelerating rate. The Earth’s average temperature is now 1.2°C warmer than in the pre-industrial period (dated as 1880-1920), and is higher than at any time during the past 10,000 years of civilization. Warming has accelerated to more than 0.3°C per decade, meaning that in the next decade we will very possibly overshoot the 1.5°C warming limit that the world agreed to in Paris.
A key insight for our future is that we now understand the difference between mere “economic growth” and real economic progress. Economic growth focuses on raising traditional measures of national income, and is merely doing more of what we are already doing: more pollution, more greenhouse gas emissions, more destruction of the forests. True economic progress aims to raise the wellbeing of humanity, by ending poverty, achieving a fairer and more just economy, ensuring the quality education for all children, preventing new disease outbreaks, and increasing living standards through sustainable technologies and business practices. True economic progress aims to transform our societies and technologies to raise human wellbeing.
Regeneration 2030 is a powerful business initiative led by Italian business leaders committed to real transformation. Regeneration aims to learn from nature itself, by creating a more circular economy that eliminates wastes and pollution by recycling, reusing, and regenerating natural resources. Of course, an economy can’t be entirely circular – it needs energy from the outside (otherwise violating the laws of thermodynamics). But rather than the energy coming from digging up and burning fossil fuels, the energy of the future should come from the sun (including solar power, wind, hydroelectric, and sustainable bioenergy) and from other safe technologies. Even safe man-made fusion energy may be within technical and economical reach in a few decades.
On my part, I am trying as well to help regenerate economics, to become a new and more holistic academic discipline of sustainable development. Just as business needs to be more holistic and aligned with the SDGs, economics as an intellectual discipline needs to recognize that the market economy must be embedded within an ethical framework, and that politics must aim for the common good. Scientific disciplines must work together, joining forces across the natural sciences, policy sciences, human sciences, and the arts. Pope Francis has spurred the call for such a new and holistic economics by encouraging young people to adopt a new “Economy of Francesco,” inspired by the love of nature and humanity of St. Francis of Assisi.
Sustainable Development, Regenerative Economy, and the Economy of Francesco are, at the core, a new way of harnessing our know-how, 21stcentury technologies, and ethics, to promote human wellbeing. The first principle is the common good – and that means that we must start with peace and cooperation. Ending the war in Ukraine at the negotiating table without further delay, and finding global common purpose between the West and East, is a good place for us to begin anew.
Published in Il Sole 24 Ore for the Trento Festival of Economics