You mistake a market economy for capitalism. We had a market economy for a very long time, even in the middle ages. Actually Ludwig von Mises describes this barter based market economies perfect (but fails to understand capitalism).
Capitalism, that we have have since more or less 150 years requires the pre financing on a huge scale of industrial production. This requires debt that can only be, due to interest, paid back with growth.
There can't be a capitalist economy without growth by definition. From the link given by me:
"One big issue with even trying to stair-step fossil fuel use is the fact that our financial system needs growth to keep from collapsing. In order to pay back debt with interest, it is necessary to have economic growth, and financial growth and growth in fossil fuel use are very closely tied. Economic growth can be 2% or 3% above fossil fuel use growth because of efficiency gains, and economic growth in a particular country can be higher than that of world economic growth because of greater outsourcing of manufacturing to other countries. There was even a gain in the late 70s and early 80s, as we picked the low-hanging efficiency fruit and switched to using nuclear. But overall, there is no evidence that fossil fuel use, or even oil use, can be divorced from economic growth. If there is a big decline in fossil fuel use, it will translate to a decline in economic growth.
The need for economic growth in order to pay back debt even applies to our money supply itself. Money is loaned into existence. This happens when a commercial bank makes a loan and deposit at the same time. The problem is that when the money is created, not enough money is loaned into existence to pay back the interest as well. So economic growth is needed to create the additional money so that the debt can be paid back with interest.
Because of this issue, a Steady State Economy (economy without growth) requires a financial system with virtually no debt. It might be possible to have a little debt, but its use would be primarily to facilitate short-term transactions. Debt jubilees at regular intervals might be needed, to keep people from building up much debt."
> to pay back debt with interest, it is necessary to have economic growth, and financial growth
This toy model ignores defaults and fiscal spending.
Defaults destroy debt in the absence of growth (in the process transferring wealth from creditors to debtors). Fiscal spending crates money with no debt (in the process transferring wealth from savers to borrowers). These counter-currents let the system stay stable while credit flows from savers (via equity) and creditors (via debt) to investments and borrowers.
Leveraged systems have a multitude of steady states in a zero-sum environment. Even more when tastes and preferences change as human tastes and preferences do.
> growth in fossil fuel use are very closely tied
I have debunked this in another comment [1]. Energy intensity of GDP has been falling for decades. The carbon intensity of our economy is falling faster.
>> growth in fossil fuel use are very closely tied
>I have debunked this in another comment [1]. Energy intensity of GDP has been falling for decades. The carbon intensity of our economy is falling faster.
Both can be true, energy intensity of GDP has been falling even worldwide. But GDP and energy consumption is still correlated, i.e. you can plot a nice regression line in this plot:
"Energy intensity of GDP has been falling for decades."
No, it has not. While this is true for the US, she just outsources manufacturing to China. Hence the energy intensive steps are done outside the US. So your comment is true for the US but not for the world economy as a whole.
The first graph there seems to show a decreasing energy intensity since 2011. Is there something I'm not seeing here?
For instance, one source says that energy production in 2019 was 14,715 MToe (million tonnes oil equivalent) or 14.7 E12 koe (kilograms). The graph said energy intensity was 0.110 koe per $2015. That implies a world GDP of over 130 trillion in 2015$. But I thought GDP was around $80 trillion (maybe a bit higher using purchasing power parity).
I'm confused. Is energy intensity decreasing because somebody's using an inflated denominator (PPP dollars)? What's really happening?
Capitalism, that we have have since more or less 150 years requires the pre financing on a huge scale of industrial production. This requires debt that can only be, due to interest, paid back with growth.
There can't be a capitalist economy without growth by definition. From the link given by me:
"One big issue with even trying to stair-step fossil fuel use is the fact that our financial system needs growth to keep from collapsing. In order to pay back debt with interest, it is necessary to have economic growth, and financial growth and growth in fossil fuel use are very closely tied. Economic growth can be 2% or 3% above fossil fuel use growth because of efficiency gains, and economic growth in a particular country can be higher than that of world economic growth because of greater outsourcing of manufacturing to other countries. There was even a gain in the late 70s and early 80s, as we picked the low-hanging efficiency fruit and switched to using nuclear. But overall, there is no evidence that fossil fuel use, or even oil use, can be divorced from economic growth. If there is a big decline in fossil fuel use, it will translate to a decline in economic growth.
The need for economic growth in order to pay back debt even applies to our money supply itself. Money is loaned into existence. This happens when a commercial bank makes a loan and deposit at the same time. The problem is that when the money is created, not enough money is loaned into existence to pay back the interest as well. So economic growth is needed to create the additional money so that the debt can be paid back with interest.
Because of this issue, a Steady State Economy (economy without growth) requires a financial system with virtually no debt. It might be possible to have a little debt, but its use would be primarily to facilitate short-term transactions. Debt jubilees at regular intervals might be needed, to keep people from building up much debt."