The Legacy of the Club of Rome

TheLegacyofthe Club ofRome

Hereis a writtenversionofthespeech I gaveatthemeetingheldinBucharestinoccasionofthe 20thanniversary ofthefoundationoftheRumaniansectionofthe Club ofRome (ARCoR), onOct 17, 2013. Itwas a somewhat formal reunion, so myspeechwas a little more formal than usual. Whatfollowsisnot a transcription, but a textversionwrittenfrommemory. Thanksto Mr. LiviuTudor, secretary general ofARCoR, to Mr. MugurIsarescu, president, andtoallthemembersofARCoRforhavinginvited me inthisoccasion. (Theimageaboveisfromlastyear’sARCoRmeeting, buttheone I amreportingaboutwasheldinthesameroominBucharest)

Ladies and gentlemen, it is a privilege and a honor for me to represent the Club of Rome today. So, I can bring to you the greetings and the congratulations of the co-presidents of the Club, Mr. Anders Wijkman and Mr. Ernst Weizsacker; as well as those of the Secretary General, Mr. Ian Johnson.

We are celebrating today the 20thanniversary of the foundation of the Romanian association of the Club of Rome, ARCoR, which is a remarkable achievement. It is just as remarkable, I believe, the achievement of the Club as a global association which has already been existing for more than 40 years after it was founded by Mr. Aurelio Peccei in 1969.

What we are celebrating today, however, is not the memory of past glories. What we are celebrating, instead, is the growing realization of how important and how modern was the vision that appeared in the first report to the Club, the very famous book titled “The Limits to Growth”. Today, more than 40 years later, I had the honor to sign as the main author the 33rd report to the Club; a book titled “Plundering the Planet.” With this book, we re-examined several of the scenarios and the concept of the 1972 report. We found how consistently the ideas of the early report were on target and how closely the world’s economy has followed the scenario that was defined as “base case” and that today we would define as “business as usual”. It is a scenario that sees the growth of the world’s economy maintained up to the first decades of the 21st century, to be followed by a stasis and then by rapid decline.

Please be careful: “The Limits to Growth” was not a prophecy and never was supposed to be one. The authors clearly stated in the book that they didn’t want the future to look like their “base case” scenario. Nobody would want the world’s economy to collapse, with all the consequences involved, of course They said, correctly, that our future is something that we create with our actions and our decisions and that if we wanted to avoid decline, we had to make choices that would avoid it. But that wasn’t done and the base case scenario is becoming more and more, unfortunately, like a prophecy.

However, independently of what will be the evolution of the world’s economy in the coming years, I think that the main legacy of “The Limits to Growth” today, is to remind to us how important material resources are for our livelihood and for our prosperity. Wealth is not created by banks or other financial institutions; it is created by what we call “natural resources” that are produced, are processed by our industrial system, and finally transformed into products: it is what we call “the economy”. Without natural resources, there would be no economy, and money would be worthless because there would be nothing to buy. That should be obvious, but sometimes we are so worried – I’d say obsessed – by the vagaries of the world’s financial system! We tend to forget something that my friend and colleague, professor Giorgio Nebbia, used to tell me “Economics is the science of all material things”

So, were do we stand on these “material things” today? Well, for one thing it is clear that we are NOT running out of anything: the production of most important minerals is not declining and no major mineral commodity is missing in the market, at least if you are willing to pay for it. It was sometimes said that the message of “The Limits to Growth;” was that we would soon run out of mineral resources. But that’s not true. “The Limits to Growth” never said anything like that. It was clear from the calculations reported in the study that we wouldn’t ever run out of major mineral resources before the end of the 20th century. The point is quite a different one: much before of physically running out of resources, we’ll run out of cheap resources.

And that’s exactly what’s happening. We are not running out of anything, but we must pay more for what we need. As you surely know, oil prices have increased of about a factor five over the past 5-6 years and the average price of mineral resources has increased of a factor of about three over the same time span. This is a robust trend and it is not painless for the economies importing countries.

Let me give you some data: in 2012, the European Union countries imported about 500 billion euros worth of fossil fuels (1), that is about 4% of the European GdP. Single countries show slightly different values, for instance for Italy it was about 66 billion euros of imports, corresponding to more than 4%; of the Italian GdP. For Romania, the fraction is smaller, in part because Romania produces a relatively large amount of fossil fuels in comparison to the size of its economy.

Consider that these are just the costs of importing fossil fuels; more has to be spent for importing other mineral commodities which normally “embed” a lot of energy in the form of fossil fuels used for their extraction, processing, and transportation. But let’s remain with fossil fuels. Let’s ask ourselves a question: is 4% is a lot or a little? Well, it is one of these questions that must be answered with a classic “it depends”. If the economy could grow, then the increasing costs of fossil fuels wouldn’t be much of a burden – they would remain more or less the same fraction of the whole economy. But that has not been the case. The European economy is growing, but growth has been far from robust in the past years and in several countries the economy not growing at all. And these countries are seen their “energy bill” growing up and becoming a heavy burden. A good example is Italy; but the same kind of troubles are everywhere. As we speak of percentage points of the European economy we are speaking of hundreds of billions of euros which move from Europe – mostly an importer of mineral commodities – to producers, which are mostly outside Europe.

This gigantic transfer of wealth cannot remain without consequences and I think that it is one of the major reasons of the troubles we are experiencing today. As I said before, the main legacy of “The Limits to Growth” is to remind us that our prosperity is based on material resources and we shouldn’t forget that. I invite you to consider this element when you try to understand what’s happening.

But there is another element that we can consider as the legacy of the Club of Rome today, and it goes straight to the core of the matter. You see, the scenarios that are at the basis of the study “The Limits to Growth” were created using a technique called “system dynamics”. It has to do with solving differential equations in a computer but, in reality, it is nothing more than formalized common sense.

Let me explain: I would define “common sense” in a very simple manner: it is just thinking of consequences and, in particular, thinking of the long term consequences of what you do. Using a computer means that you can project your common sense further in the future and to consider more complicated systems than those you deal with normally. But common sense – thinking of consequences – remains a quality of human thinking that, unfortunately, at times we refuse to utilize.

Considering our present situations we are facing choices that will have profound consequences for our future. For instance, should we drill for more oil and gas? We can, of course, choose to invest large amounts of our current resources in order to exploit the so-called “non conventional” resources. But the consequence will be that we’ll become even more dependent on a resource that is becoming more and more difficult and expensive to obtain (to say nothing of the worsening of the climate problem). So, everything has consequences and we should think about that before we take these important decisions if we want to take them wisely.

To conclude, I’d like to cite a phrase that’s often attributed to Robert Luis Stevenson. It is, “Everyone of us, sooner or later, sits down at a banquet of consequences”. What will be served at the banquet will depend on the choices we are making now. In this sense, the methods and the ideas developed by the Club of Rome already in the 1970s can help us to make wise choices (if we want to). This is the legacy of the Club of Rome

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