More From Less by Andrew McAfee

For nearly all of human history, humanity was locked in a zero-sum struggle against nature, trying to extract as much of its bounty as it could. A society’s wealth was closely correlated with how much arable land it had, how much exploitable natural resources it had, and how much energy it could harness. If food or materials were hit by supply shocks, the usual outcome was a famine that cut the population down to a size that the land could support.

Humanity’s ability to extract from nature increased abruptly during the Industrial Revolution with the rise of coal energy. One of coal’s first major applications was powering the manufacturing and transportation of fertilizers for farms, increasing the amount of food that a fixed area of cropland could produce. Industrialization brought increases in deforestation, mining, over-fishing, over-hunting, and pollution of air and water; humanity was making gains at nature’s expense. As industrializing societies extracted more from the land, their material standards of living and their populations both increased by a degree that was unprecedented at the time. However, 19th century economic scholars were already warning that the economic boom depended on the endless availability of raw materials and fossil fuels; once these finite resources were exhausted, the whole house of cards would come crashing down.

America’s first Earth Day in 1970 occurred during a global population boom; pessimism was in the air. The young environmentalist movement confidently predicted that unless industrialization backtracked significantly, it would lead to wholesale wreckage of the biosphere and a Malthusian population correction. The movement’s main prescriptions were to consume less, recycle more, have the government impose more top-down limits, and to abandon industrialized urban life in favor of returning to the land.

50 years later, the forecasted famines and shortages haven’t happened. Reducing consumption and returning back to the land never took off, recycling proved to be a success, and governments imposed various limits on pollution, though usually not draconian. A different solution unexpectedly dominated all the others: the dematerialization of the economy.

As America and other developed countries transitioned from manufacturing-oriented to service-oriented economies, they moved past the point of “peak stuff.” The total consumption of metals, wood-derived products, and other building materials have peaked at various points between the 1980s and the 2000s, but nearly all are now declining. American agriculture’s land, fertilizer, and water usage have been post-peak since the 1980s, yet more food is being generated than ever before. The developed world’s energy consumption has flatlined rather than continue rising, and some energy sources like coal have seen absolute declines. Despite ongoing population and GDP growth, air and water pollution peaked and declined, mainly thanks to punitive regulations and cap-and-trade programs. The world has had no high-profile wildlife species extinctions in the past 50 years, mainly thanks to the rise of protected areas.

The reduced consumption of many commodities has often happened in spite of abundant supply and falling prices, indicating a slackening in demand. For the first time in history, the economy now primarily revolves around using existing resources more efficiently rather than around extracting more resources. For the first time in history, economic growth has uncoupled itself from environmental impact. For the first time in history, rich countries have healthier environments and less pollution than poor ones.

Dematerialization has taken many forms. In some cases, we have figured out how to accomplish the same thing with fewer inputs; for instance, today’s soda cans are made up of much less metal than those a few decades ago. In some cases, we have found better substitutes for old ingredients; for instance, coal, the original fossil fuel, is gradually being supplanted by less-polluting sources of energy. In some cases, we have found ways to improve the utilization rate of resources; for instance, modern computing has made it easier for airlines to optimize for full flights. In some cases, we have eliminated some product categories altogether; for instance, dozens of physical gadgets have been made obsolete by the smartphone. In most cases, these efficiency improvements didn’t arise as a result of environmental pressures; they happened because they made rational economic sense.

Like industrialization, dematerialization is not inevitable and it requires the right incentives to be in place. If markets aren’t free, competitive, and governed by property protections, there is little incentive to find better ways to do things. If prices for commodities don’t float freely based on supply and demand, there is little incentive to avoid unnecessary overproduction or to be thrifty in the face of shortages. If the government is toothless or corrupt, businesses will exploit and pollute nature with impunity, enriching themselves at everyone else’s expense. If the general public is both misinformed and strongly opinionated, governments may be steered towards bad policies. If niche private interests gain too much political power, they can steer government policy in ways that protect their cash cows at society’s expense. Fortunately, nearly every region of the world (with a few exceptions like Venezuela) has seen improvements along these dimensions in recent decades.

Even as the world population has continued rising, the absolute number of people below the poverty line has declined. Despite these successes, dematerialization has brought a few controversial or undesirable side effects that remain unresolved.

Within most industries, there is a widening gap between high-performing and low-performing companies; high-performing companies are typically the subset that is embracing modern technology and know-how. Many markets that were formerly dispersed have become winner-take-all or winner-take-most as these high-performing companies outcompeted everyone else. Some sectors of the economy have consolidated so much that they are raising antitrust concerns about monopolization and declining innovation.

Whereas industrialization raised the standard of living for all regions and all social classes, dematerialization has a sharper divide between winners and losers. Despite the roaring economic growth of the 2010s decade, about 20% of American counties, nearly all rural, experienced absolute declines in GDP as old industries became uncompetitive. Even as inequality decreases at the worldwide level, it is increasing within many individual countries.

Dematerializing markets have continued their industrial-era trend of supplanting traditional institutions like extended family, religion, and informal social circles. Despite the world being more urbanized and interconnected than ever before, perceived loneliness and social disconnection continue to rise. Suicide, mental health problems, and drug addiction, all of which often follow from low social capital, all appear to be on the rise.

As consumers become more affluent and informed, mainstream culture is becoming more pluralistic, diverse, tolerant, and concerned about ethics and equity. In many countries, people who perceive themselves as having been left behind by the economy are doubling down on traditional values and leading a conservative authoritarian backlash against these cultural changes. A heated culture war between pluralists and authoritarians now exists in many countries and acts as their main political fault line.

One disappointing outcome of recent decades has been the relatively tepid battle waged against greenhouse gases and climate change. Unlike with other pollutants, punitive taxes and cap-and-trade programs have a hard political sell for carbon dioxide, mainly because carbon polluters are so diverse and numerous, because carbon emissions remain tightly coupled with standards of living, and because of the pains of cutbacks are sharp and local while the benefits are vague and global. Governments and businesses are largely appealing to ethical and brand image concerns when they choose to fight climate change, but if the right incentive structures were in place, there could be rational economic incentives too.

The world still has many problems to solve, but the developed world is showing that the Malthusian era of history has ended. If the world continues its recent trends of allowing markets to solve problems, readily embracing new technology, building up its stock of human capital, and using government policy to steer markets away from negative externalities like pollution, the world will be ready to meet these challenges.