Jeff Rubin on the end of global economic growth


This file photo from Sept. 19, 2011, shows an aerial view of a tar sands mine facility near Fort McMurray, Alberta. (AP Photo/The Canadian Press, Jeff McIntosh)

First aired on As It Happens (8/5/12)

According to Jeff Rubin, an economist and former chief economist for CIBC World Markets, the Canadian government is getting it wrong. At least when it comes to the economy. Economic growth has always been dependent on cheap, abundant sources of fuel. Now that fuel is getting more and more expensive and more and more difficult to extract and produce, Rubin argues that it's the wrong horse to hitch Canada's future to. The rising price of oil is going to have major ramifications for not only the Canadian economy, but the global one — and this might not be such a bad thing. He explains why in his new book, The End of Growth: But Is That All Bad?.

When oil was cheap, we consumed it at huge rates, and economies that were largely dependent on oil, like the Unites States, flourished. But as oil became increasingly more expensive, oil-dependent economies slowed. When the price of oil changes, "you don't just change the speed at which you can drive your car," Rubin told As It Happens host Carol Off in a recent interview. "You change the speed at which you economy can grow. And that's something, unfortunately, that hasn't yet registered among the institutions that set economic policy for us."


Rubin suggests that economic growth won't happen because of triple-digit oil prices. Once oil becomes too expensive for consumers to purchase, they'll stop purchasing it. It's as simple as that. "When we get to oil at that range of prices, we'll come to discover the whole notion of peak oil isn't about what we can drill, it's really about what we can afford to burn," he explained. "The world will never be out of oil in an absolute geological sense, but I argue that's irrelevant because if we can't afford to burn the stuff, it might as well not exist."

Rubin sees no problem in structuring Canada's economy around fuel production. "I think if we're going to take two million barrels of oil out of the ground every day, we might as well get the full value of the oil." However, he's quick to point out that we cannot structure our economy around anticipated economic growth or anticipated oil demand. We cannot expect to turn that two million barrels into three million barrels. Oil is now too expensive for that kind of demand to happen. He believes that China's economy will not grow as fast as everyone is predicting, and it would need to grow a whole lot faster to make their need for fuel so great that they'd send a supertanker around the world to be fueled up with synthetic crude oil from the tar sands. It's too expensive and too far away for that to be a viable option. So, if China's economy doesn't grow as expected, and the U.S. economy doesn't grow as expected, and Canada's economy is dependent on exporting oil to these countries, our economy won't grow as expected.

However, Rubin doesn't see this as necessarily a bad thing. For example, economic recessions are good for the environment. "When you stop growing, you stop emitting carbon," he said. We only have to look as far back as 2009 to see evidence of this. "During the economic recession, global emissions, for the first time in 25 years, actually fell," he said. And there were no major international agreements, no government policies or initiatives to make that happen. "That was simply because the global economy shrank." Rubin also points out that economic growth doesn't correlate to happiness or quality of life. We just need to shift our perspective on the kinds of lifestyle we need and the ones that are economically feasible.

Rubin also believes that a lack of economic growth will lead to a "more sustainable economy." The global economy has been in a shambles in the past few years, and that's because the focus has been on one thing: returning to a state of growth. Rubin says the world's resources make that simply not possible. But, a stable non-growing economy is "a more sustainable economy."

And for Rubin, a more stable, sustainable economy is a more desirable one.

Related links: