While working as CIBC’s Chief Economist for World Markets, Jeff Rubin told the bank’s CEO that he wanted to write a book about how triple-digit oil prices could reverse globalization. All he got in return was “an icy stare” and a warning about the need for legal permission. It was clear that he would have to choose between being an author and being a CIBC economist, and with his 2009 bestseller Why Your World is About to Get a Whole Lot Smaller, Rubin made his choice clear.
In The End of Growth, his recently released follow up, Rubin argues that the unquestioned growth imperative of economic theory is doomed in practice, and that the rising price of fossil fuel energy is redefining our world. The basis of his argument is that our current global economy is almost entirely dependent on coal, oil and gas, and the price of retrieving these resources is becoming prohibitively expensive in a hurry, so humans need to adapt to the inevitable implications. He makes the timely point that “escalating resource prices are telling us that conservation has never been more important than it is right now.”
Yet Rubin falters when he writes that “the best cure for high oil prices is high oil prices.” While there is no doubt that higher prices will deter the average user, our predicament is quite a bit more complicated than that. Higher oil prices cut both ways. On the one hand, average consumers will use less. On the other, oil producers will supply more. But it’s not at all clear when, where and how the market will “clear.” As long as the wealthy don’t run out of ways to pay for and burn it, conservation efforts will lag behind both use and supply.
Rubin believes that these higher prices would make policies to reduce carbon emissions redundant. After all, why would we need a carbon tax or credit when the price of the fuel that produces it becomes too expensive to use? But he goes on to starkly contradict himself, using Denmark as an exemplar of fossil fuel energy conservation. In doing so, he is implicitly advocating for what he claimed was “inevitable.” Policies such as Denmark’s punitive taxes on car ownership and fossil fuel energy use (and the behaviours they encourage) are not inevitable. Rather, they are the result of using foresight to harness price signals, and public policy to proactively transition away from fossil fuels. Unlike the market, governments are able to tax energy use that is not in the public interest.
Rubin is correct that price signals are currently our best incentive for fossil fuel energy conservation. Environmental economists have been saying this for decades. The implication is that economics can have a symbiotic relationship with the environment, rather than a parasitic one. Unfortunately, without proactive public policy, waiting for market-based price signals alone will inevitably lag well behind ecological reality.
The End of Growth leaves important questions unanswered, but it is also very well written, engaging, concise and informative. Even while writing for a wide audience, Rubin is able reward his readers with many insights. This latest book contains many ideas that are well worth considering, and which will augment the economic and environmental understanding of anyone who chooses to read it.
The End of Growth, Jeff Rubin, Toronto: Random House Canada, 2012, 304 pages
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