Technological growth is exponential

Not just with Corona : How exponential growth affects our lives

“Exponential growth” deserves to be the term for 2020. In the future, school books in mathematics will refer to this year and the corona crisis when they introduce the term. The growth in the spread of the virus is not the only exponential process that has a significant impact on our lives.

The measures to restrict contact, which have so massively intervened in our lives, were justified with concerns about an uncontrolled "exponential growth" of the infections caused by the corona virus. Chancellor Merkel explained the concept of exponential growth at the end of September 2020: “We had 300 new infections on some days at the end of June and beginning of July. And now we have 2000 infections some days. And that means nothing else than that the number of infections doubled three times in three months in July, August, and September. If that were to continue in the next three months of October, November, December, then we would come from 2400 to 4800, to 9600, to 19200. ”And so it happened: The number of 20,000 new infections per day was exceeded in mid-November .

Exponential growth is important for many areas of life

Meanwhile, it is not only the corona crisis that is becoming more explosive through exponential growth. Digitization would not have been possible without the exponential growth in digital performance: "Moore’s law" describes the phenomenon that the number of transistors on a computer chip has doubled every two years since 1970. The enormous computing power that is available to us today - many millions of times greater than in 1970 - made applications such as big data and artificial intelligence possible on a large scale in the first place.

Any process that has a constant rate of growth grows exponentially. Another such process that has a major impact on our lives is economic growth. A concrete example: The Chinese economy has grown at a rate of over ten percent per year over the past few decades. The gross domestic product (GDP), to put it simply, the economic power, has doubled in China every seven years.

While the GDP in China was around an eighteenth of the European GDP in 1990, it was already a sixth in 2000, a good third in 2010 and almost as large in 2020. Meanwhile, the growth rates in China have fallen to around five to six percent per year, so that a further doubling of the GDP can be expected in twelve to 15 years. The world has become a different than it was 30 years ago. It is clear, for example, that the USA would not take such massive action against China if the country were still at the level of development from 1990 and thus not a serious competitor.

The climate giant is also characterized by exponential growth

Economic growth is accompanied by an increase in man-made climate-damaging emissions. The climate crisis is therefore also a consequence of exponential growth. Emissions have increased at a rate of almost three percent since 1950, so the annual output doubles every 25 years.

In the past ten years, however, this increase has slowed; it is currently around one percent per year. As long as energy is mainly generated with coal, oil and gas and more economic output goes hand in hand with more energy, the connection between economic growth and growth in emissions is imperative.

In the corona crisis as well as in the climate crisis, there are three ways to deal with the negative consequences of exponential growth. First, an interruption in the spread of the virus by reducing social contacts or a climate policy that shuts down the economy. Second, immunization through vaccination or decoupling of emissions from economic output. Thirdly, combating the consequences through medical treatment or through adaptation to climate change.

Green growth needs technical innovations

The second way leads to the lowest loss of welfare, if it is technically feasible: that is, if a vaccine is available, and if technologies are available that allow green growth. The vaccine was developed in an impressively short time. And it is also possible to decouple emissions from economic output: electricity from renewable energies has become increasingly cheaper in recent decades and now covers almost half of the electricity demand in Germany. In the past 30 years, the annual economic output in Europe has grown by a good 60 percent, while the emission of climate-damaging CO2 has decreased by more than 20 percent. In order to accelerate this development and implement it worldwide, not only one “vaccine” is required, but a multitude of innovations. Electricity from renewable energies must become even cheaper, security of supply must continue to be guaranteed through the development of affordable energy storage systems, and industry and agriculture must change their production processes in order to get a grip on CO2 emissions.

Processes with exponential growth have changed our world and are changing it every day. A good understanding of this is not only something for math textbooks, but also for textbooks in political, social and economic sciences.

Achim Wambach, born in 1968, is an economist and president of the Center for European Economic Research. Since 2006 he has been a member of the scientific advisory board of the Federal Ministry of Economics.

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