Economic Maturity: Speculations on the Future of Human Productive Systems in a Finite World
Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist.
Kenneth E. Boulding
The Chimera of Individual Financial Security
The Gulf oil leak has got lots of environmental web sites buzzing about the need for new economic paradigms and creative approaches to solving our economic and environmental problems. In my view most of the thinking about such issues, creative or otherwise, is addressing symptoms rather than the root cause of our problems. Over consumption, the growth orientation of our economy, oil addiction and so forth are mere symptoms.
The root cause of our problems is the competitive accumulation of financial security. Money as a private store of value is an engine of destruction. More conservative management of the banking system and stock market combined with the grafting of ecological cost accounting onto the price system cannot make this particular function of money sustainable.
A sustainable system of economic production requires that the competitive accumulation of financial security must be replaced by the cooperative maintenance of the means of production, which means naturally include a healthy biosphere. Unfortunately this idea of cooperative maintenance is diametrically oppose to the Social Will of our age which has declared financialized economic security to be a perfect and eternal form. Mere logical argument cannot even dent the armor of so formidable a foe as the Social Will.
In discussions with people who are far to the green side of the political spectrum I have received positive responses to the ideas of reduced consumption and voluntary simplicity, but when I try to explain what these things imply about the performance of 401K funds and the direction of movement of property values, my listeners eyes glaze over and they no longer pay attention to what I am saying. They do not attempt to refute my arguments; They are simply not interested in trying to understand them.
What channels the Social Will will flow into when our dreams financialized economic security are show to be utterly chimerical is the great question of our age. We are doomed to live in interesting times.
Reduction of Consumption Requires Changing the Desires of Producers as Well as Those of Consumers
Many environmentalists talk about the importance of reducing consumption, but very few of them show any sign of understanding the economic systems implications of such a reduction. Production and consumption are coupled activities; One cannot exist without the other. It is obvious that without production there can be no consumption, but a surprising number of people believe that production can exist without consumption. This belief is false. Society as a whole cannot consume less than it produces other than in the sense of temporarily foregoing consumption in the present in order to build up production infrastructure which will be used to secure larger consumption in the future. The only way to permanently reduce consumption to to permanently reduce production as well.
From a purely physical point of view no problem exists with reducing both production and consumption. If we are producing and consuming wastefully we can simply stop doing so and still maintain a decent quality of life. However, from the point of modern social organization reduction of production is disastrous; The minute production stagnates or declines people lose their jobs, and their retirement funds, which are intended to secure future consumption rights, plummet in value. On the production side of the economic equation a fundamental conflict exist beween the interests of the individual and the interests of society. The individual economic actor always wishes to produce as much as possible even if he or she does not wish to consume the full equivalent value of their production in the present. But because production cannot exist without consumption (except on an ephermal, short term basis), the individual drive to obtain future economic security through 'savings' inevitably drives the advertising machine and consumer society.
If the problems of modern capitalism are to be fixed then the desires of producers must be altered as well as the desires of consumers. The producer must be motivated to produce what is really needed and nothing more. Accomplishing this feat will require profound changes in the social contract and not just individual choices to reduce consumption.
February 5, 2010
The Problem of Economic Growth
The problem with economic growth was succinctly summed up by Kenneth Boulding in his essay Economics and The Future of Man:
For the last two hundred years the discovery of new resources and improved means of utilization of old resources through the advance of knowledge has proceeded faster than the expansion of population, at least in the successfully developing parts of the world. We are beginning to face the fact, however, that the kind of "linear economy," which is peculiarly characteristic of modern technology, which extracts fossil fuels and ores at one end and transforms them into commodities and ultimately into waste products which are spewed out the other end into pollutable reservoirs is a process which is inherently suicidal and must eventually come to an end, either through the exhaustion of the resources in the mines and wells at the one end or through the exhaustion of the "sinks", that is pollutable reservoirs, at the other end. The end of this spectacular process of development through which we are going could easily be a virtually dead earth with all its concentration of ores and energy sources depleted and all of its pollutable reservoirs filled up.
Various ways of avoiding the dead earth scenario described by Boulding can be imagined. One of the more popular visions of sustainability includes stabilization of the human population, utilization of solar energy, and recycling of materials. However, if we depend on the finite flow of energy from the sun and the finite supply of materials from the earth's crust and from its biosphere, then flows of energy and materials through the economic machinery must reach limiting rates.
True believers in the growth paradigm are not fazed by such throughput limitations. They claim that with advancing technology we can dematerialize our economic output. That is to say that we can create larger amounts of use value out of given inputs of energy and materials and thus keep capital markets healthy for a long time to come even in the presence resource limitations. Precisely how long human technology can work this magic is usually not specified, but as long as growth can continue for at least another fifty years the day of reckoning has been effectively moved into the infinite future, and you and I can breathe easily, confident that the world will not be cruel enough to require us to become mature members of the ecological community.
That dematerialized growth cannot continue forever is, I think, fairly obvious. Consider the logical end point of such activity; You give me a better back rub and I sing you a better song. Note the emphasis on increasing quality exemplified by the use of the word "better". I cannot consume exponentially increasing amounts of back rubs (or of any other dematerialized service) and you cannot listen to exponentially increasing amounts of my singing. The idea that generation after generation of venture capitalists can pay for their mansions by financing such dematerialized services is nonsense.
Furthermore it is clear that capital markets do not care in a direct way about resource depletion. They just want growth over the next few years. Holding down resource costs helps to create demand and growth. If one resource becomes expensive they will seek cheaper alternatives, but zero evidence exists that capital markets are capable of applying long term systems thinking to the problem of maintaining human welfare. Capital markets have no direct concern with human welfare. They just want to manufacture and sell as much stuff as they can in the short term. This desire to sell thing results in human welfare only the sense described by Adam Smith, in which it is assumed that since people buy what they want, the more stuff that is bought and sold, the more human desires that are being fulfilled. Systems intelligence is not needed. I just try to sell you stuff and the "invisible hand" of the market guarantees that we will all become happier forever.
Even if you assume that the satisfaction of advertising induced desires represents the epitome of human fulfillment, maximizing such satisfaction today, is not doing anything to guarantee that we can fulfill such desires (or indeed even meet basic human needs) in the longer term. In the long run the human species needs to learn to live within the limits of the ecological community of which it forms a part. I see two possible ways that living within long term limits can become part of our economic reality. The first way is to overshoot our resource base and get slapped down hard by nature. The second is to give ecological intelligence a primary role (not secondary or tertiary) in governing our economic institutions. Continued adherence to the growth paradigm would seem to have the proverbial "snowball's chance in hell" of leading to option number two
Boulding, Kenneth E, Economics as Science, McGraw Hill Book Company, New York, 1970. Chapter 7
September 7, 2009
John Mavrogordato on the Destructiveness of Capitalism
Below are some selected quotes from John Mavrogordato's 1917 book The World in Chains: Some Aspects of War and Trade. Mavrogordata is an avowed socialist (He wrote in a time when this word was less discredited than it is today), but if you pay attention to the logical content of his writing rather than to the 'socialist' label you will see that he is expressing truths that could be understood by a child of ten with average intelligence. However, for better or for worse, objective, logical thinking about large scale economic/social systems issues is almost non-existent. Samuel Butler in his essay God the Known and God the Unknown opines that this general refusal to examine the underlying assumptions of dominant cultural paradigms is actually a good thing since it helps societies to cohere and to survive. However, Butler also recognized that in some cases sweeping wholesale changes in social institutions are necessary in order to meet the requirements of changed circumstances.
I am personally convince that the probability is high that we are approaching a point in history where the dominant economic/social paradigm is going become highly disfunctional, and we will be required to think hard about he underlying assumptions upon which our economic/social institutions have been founded.
Selections from The World in Chains: Some Aspects of War and Trade (These selections are taken from the Project Gutenberg etext of The World in Chains):
Modern commerce is essentially an art; the art of making people pay more than they are worth for things which they do not require.
Proper systems of distribution and exchange correspond to the digestive processes of the body, on which depend the proper nutrition of all the parts and the real prosperity of the State as a whole; yet any comprehensive plan for their control is still regarded as the most unattainable dream of Utopia, and they are left to carry on as best they can in the interstices of private acquisitiveness. National well-being is not to be measured by mere volume of trade, which is the means and not the essence of prosperity; and prosperity can certainly never exist when equitable distribution is hindered by a sort of fatty degeneration of capitalism.
More generally, the State is entitled to demand from Commerce that it should co-operate sincerely with the other elements in the State in pursuing the real objects of civilisation, inspired by an altruistic regard for the whole of which it is a part, that is by what is really "enlightened self-interest"; by what Plato has called Temperance and Mr. H. G. Wells "a sense of the State." We find instead that the trader has "day and night held on indignantly" in his disastrous hunt for markets, destroying by accident or design whatever amenity in the world does not contribute to his "one aim, one business, one desire."
True nationalism may indeed be differentiated by the absence of this artificial element of ethnological hatred. True nationalism is simply the feeling for the small independent community, a movement for the autonomy of the local group. No true manifestation of the nationalist movement in Europe is ever opposed to other nationalisms; but all alike are involved in a desperate political conflict with their common enemy Imperialism.
Only the Socialist seems to realise that in the world conceived, as modern thought must conceive it, as a continuous process, Government rather than Trade, Science and Art rather than Industry are the chief activities of the citizen.
August 17, 2009
Total Income: How Conventional Economic Language Distorts our View of Reality
My perception is that the economic thinking of most people has been straight jacketed into very narrow limits by intensive cultural indoctrination. This straight jacket is worn even by many people who perceive that ecological limits must be taken into consideration in devising long term strategies for human economic activity. Part of the problem is that range of activities which is considered to be 'economic' is too limited.
The common conception of economic activity is limited to human efforts which result in the production of current exchange income in society wide exchange media like dollar, euros, Japanese yen, etc. I will hereafter refer to this type of income as 'dollar income' and hope that people will pardon my apparent U.S. centrism. If I am an apple grower then my current exchange income in dollars is the difference between my business expenses and my gross income in dollars from the sale of apples in the current year. However, such a definition of income is extremely restrictive.
For example another source of income is ongoing services provided by past production. For example a bicycle or automobile provides transportation services for years after the initial purchase (though of course some level of current maintenance costs exist). Long lived energy efficient buildings provide ongoing income in the form warm, dry places to live and work for years after the initial outlay of production resources required for their construction. I have an electronic calculator which I purchased 35 years ago which continues to provide me with service (and thus income) three and a half decades after the initial exchange by which it came into my possession. Such services are obviously part of total real income. If you employer provided you with a car or a place to live these services would effectively augment your income since you would not have spend any of you current dollar income to obtain these things. In the same way artifacts that you paid for in the past continue to provide you with income in the present.
The fact that these ongoing services do not count as part of the economy in popular thinking is very important. Long lived products can potentially reduce our total demand on resources, but if our sole economic preoccupation is with maximizing our current exchange income in dollars, then such resource efficiency is useful only if we leverage it to manufacture and sell additional products in the present. Thus we have the phenomenon of planned obsolescence. Most hand held electronics devices today are sold with manufacturer specific batteries which cannot be replaced by the user. The assumption is that in a few years time when the battery wears out you will throw the device away and buy the latest and greatest version with superior performance and thus 'help' the economy. According the dollar income definition of economic 'health' I would have been helping the economy if I had bought a new calculator every year (and produced something of equal value, naturally) and thrown away the old one.
Another kind of income is production which is not exchanged for dollars. e.g. home grown food, house repairs, automobile repairs, clothing repairs done by the owner and so forth. Included in this category of income are many activities which, at first sight, one would not think of as being 'economic'. For example I claim that taking a recreational walk, taking a ride on your bicycle, playing with your children, playing a guitar or singing for personal pleasure are all forms of economic activity. One might object to the inclusion of such activities as part of economic production on two grounds. First one might say that no exchange is involved, but this claim is false. Human time and attention (a necessary input to all economic activity) is being exchanged for a feeling of psychological well being. Economic activity always involves a primary exchange of production resources for some desired product or service. On some occasions a secondary exchange takes place where two producers exchange their end products. The first kind of exchange is always present in any economic activity, but the second kind of exchange is not a necessity. For example growing your own food or doing your own home repairs cannot be excluded from total income since such activities reduce the need for dollar income.
The second ground for objection to such private activities of personal enjoyment as economic is that they do not involve the production of practical necessities. However, if such an objection is valid, then a very large fraction of exchanges involving dollars have been falsely identified as economic. Humvees, 60 inch plasma screen televisions, jet airplane tourism, etc. are not practical necessities. Such purchases are primarily directed at obtaining so called 'psychic income' rather than about human physical well being.
In fact even those parts of the economy which are most obviously 'practical' have a large components of psychic income associated with them. For example we could derive adequate nutrition from rice, beans, and water, but for most people food and drink are about something more than just staying physically healthy. Well prepared, good tasting food and the social act of eating with other people provides psychic income in addition to providing physical nourishment. We could all be adequately clothed (from the point of view of physical protection) by wearing exclusively sturdy, long lasting, unisex coveralls, but clothing has more significance to us than utilitarian protection from the elements, and we invest them with psychic significance as important expressions of our personal style which we wish the world to recognize and appreciate. Similarly we do not regard our houses or apartments as mere utilitarian boxes which protect us from the elements. We lay them out and furnish them in a way that we think will enhance the psychic income of our domestic life. Such examples can be multiplied ad infinitum.
Logically the psychic income from purely private recreations, hobbies, avocations etc. cannot be excluded from economic activity simply because they do not involve exchanges of dollars. If making and selling music videos is economic activity then so is playing a guitar or singing for your own pleasure. There is no logical way to separate these kinds of activities from one another. The claim that a human activity is economic only if it involves an exchange of dollars is an arbitrary and artificial definition. In fact I maintain that the proper definition of economic activity is any human effort directed at improving the physical and/or psychological well being of people. Clearly dollars do not have to change hands for such activity to take place.
Of course I think that most neo-classical economists would admit that an unofficial part of the economy exists which is not counted by the dollar GDP. However, they would also claim that the subset of the economy measured by dollar exchanges is measuring human benefit since, by definition, people spend money to gain personal benefits of some type. Therefore the more money that is spent the more benefits that are being gained. This claim is highly debatable for a number of reasons. First of all there is the problem of time scale. Even if you believe that every dollar spent in the present is improving somebody's happiness or health, if these dollars are generated by an infrastructure destined to decline because of resource depletion and environmental degradation, then future human happiness and health may be negatively impacted by the effort to maintain that infrastructure in the present. Secondly, given the existence of a huge advertising industry who raison d'etre is to bring in to existence a horde of new psychic 'needs' which can only be fulfilled by the latest productions of advancing technology, the claim that every dollar spent is increasing human happiness in the present is extremely doubtful.
However, I am not going to try to prove how much or how little human happiness is being produced by the advanced economies of the world at the present time. I merely wish to note that in a finite world with a large human population we need to find some way of substantially decoupling the production of psychic income from the consumption of material resources. The income which is truly important for economic health is total income, which includes all goods and services including ongoing services provided by past production as well as current income (physical and psychic) from all production resources, not just those that are measured by dollar exchanges.
In the economic system as it exists today we are obsessed with maximizing current exchange income in society wide exchange media such as dollars. This obsession is so extreme that a substantial group of people exists who reject any suggestion that pursuing constantly increasing dollar incomes is a bad idea as being anti-human. If you dare to propose such a heresy you will be accused of loving wild critters more than you do people and of desiring human beings to suffer and be miserable.
This obsession with current dollar income has two sources. First we have allowed dollar incomes to become primary symbols of human achievement and success, so that a large amount of psychic income is derived from the endless pursuit of more dollars. Secondly we have created an economic system in which the future material security of individuals and families depends on private 'savings' which are just investments in infrastructure, the primary purpose of which is to facilitate dollar exchanges in the present. Therefore the more dollars that change hands the more secure our future looks. As the current global recession shows, in the end game of economic growth this 'security' may prove to be entirely delusionary. I wrote about this phenomenon at greater length in my previous essay <a href="http://www.theoildrum.com/node/5121">The Anti-Economy: How the Pursuit of Private Fortunes is Destroying Community Wealth</a>.
Of course, practically speaking it is impossible to expect that people will not try to maximize their psychic income within the constraints of whatever environment they are living in. Alexandr Solzhenitsyn in <i>The Gulag Archipelago</i> writes about how he and a group of other prisoners spent their days building stone walls in the Siberian countryside. They were organized, disciplined, and took great pride in doing high quality work. They were attempting to maximize their psychic income consistent with the constraints of the unpleasant situation in which they found themselves. Of course a man such as Solzhenitsyn, once he was released from the Gulag, could not content himself with being a stone mason. He naturally sought psychic income in other enterprises more congenial to his natural bent. Even a man such as Thoreau who worked part time as a surveyor and who literally spent a large fraction of his adult life walking in the woods seeking inspiration wanted more out of life than the direct experience of communing with nature. If he was not particularly interested in money, he did desire recognition of his intellectual and artistic achievements, and he died a largely disappointed man because he did not receive such recognition.
The problem with which we are faced is how to decouple the production of psychic income and of material security from increasing levels of resource consumption. My own perception is that this decoupling cannot take place while we continue to regard current exchange income in dollars as the end all and be all of economic activity. Of course there are people who disagree with this conclusion. I once got into an extended argument with a person with formal education in economics who had read and agreed with the primary conclusions of <a href="http://www.clubofrome.org/docs/limits.rtf"><i>Limits to Growth</i></a> by Meadows et. al., and who admitted that economic growth in the sense that it has been pursued for the last several centuries is not sustainable, but who nevertheless maintained that we could redefine economic growth in such a way that we could maintain the outward forms of private finance capitalism and still converge on an ecologically healthy economic system. At the time I was unable to follow his logic, but looking back on the exchange I believe that the essence of his argument was that by clever social engineering we can make our dollar incomes correspond with an ecologically healthy total income (including psychic components), so that we can go on chasing more dollars forever and simultaneously live in an ecologically sane manner. This would certainly be a neat trick, and if anyone thinks that they know how to accomplish it please don't hesitate to speak up. I would sleep a lot more comfortably at night if I believed that such a feat of social engineering were possible.
The opposite extreme to this vision of an ecologically sane pursuit of ever increasing dollar incomes is the complete rejection of large scale exchange media such a dollars as an inherently evil and destructive institution. From this point of view money is rather like Sauron's ring of power in Tolkien's Middle Earth trilogy; Even if you initially try to use it for good purposes its continued use will ultimately corrupt you and turn your efforts to evil and destruction.
I am personally not ready to take such an extreme view of the institution of money. Exchange is a necessary part of any economic system in which any degree of specialization of labor is present. People sometimes write of economically simpler societies as having a gift culture. If an exceptionally great hunter brings back meat to the village he makes a gift of it to the people rather than numerically bargaining for the maximum possible return on his personal production. Nevertheless an effective exchange has taken place. The hunter has provided meat to the community and he in turn will receive other things that he needs or wants from the community.
In in the future, if we retain some degree of large scale specialized industrial enterprises (e.g. metals manufacturing, electronics manufacturing, etc.) the people who engage in such activities will effectively exchange their output for other kinds of economic output. I think that some kind of formal, large scale exchange media could play a useful role in facilitating such transactions. However, we have to turn that exchange media into a useful tool for accomplishing specific kinds of economic activities rather than allowing it to grow into a monster which defines the nature of all economic activity and which completely dominates our political life.
My view is that rather than trying to maximize our current exchange income in dollars we should be trying to minimize it, consistent with the constraint of producing adequate levels of total income. That is large scale industrial enterprises should be focused on producing a relatively limited range of products with an emphasis on practical utility and long-livedness. For example large scale clothing manufacture should focus on utilitarian long lived products (I do not mean prison gray coveralls. More variety than this can be allowed). People who find life unbearable unless they can express their personal style in their clothing can create or purchase such things locally in more labor intensive ways. Maybe in this case 'style' will come to have real personal meaning rather than being an image sold by the advertising departments of multinational conglomerates. Insofar as consumer electronics continue to exist they should be designed to last (and to be repairable) for long periods of time. My calculator should be a norm to be aspired to. And so forth.
Of course enormous social and political changes are implied by such a change in the orientation of the large scale economy. I am not one of these people who believes that reform of the monetary system alone is sufficient to create ecological sanity. I do not intend in this essay to try to present a detailed vision of an alternative to BAU private finance capitalism. However, I would like to point two institutional features which would be necessary in order to limit the role of large scale exchange currencies our economy:
1. Community control of finance
2. Community contol of capital surpluses
The community in question is the group of people who are served by the industries in question, which for large scale exchange currencies would correspond to national or even large constituencies. I envision that beneath these larger communities would exist smaller regional and local communities that would deal with other types of economic production.
Yes, I know that I am promoting 'socialism'. I do not do so because of deep ideological convictions. I do so because my perception is that allowing the existence of large private concentrations of capital whose only purpose in life is to enlarge themselves will inevitably orient the monetary system supporting such concentrations towards growth. Most of the people who dismiss me as a socialist moron do not attempt to dispute the necessity of growth for the proper functioning of private finance capitalism. They simply claim that some combination of dematerialization of economic output (i.e. population stabilization and greater resource efficiency) and resource switching will allow the global economy to grow comfortably for many long decades into the future. I occasionally run into someone who asserts that private finance capitalism can function just fine in the absence of growth, but I have yet to read a single coherent paragraph supporting this assertion.
Without getting into the details of how I think that community based capitalism might be made to work let me mention some things that I think are <b>not</b> implied by such a scheme of economic organization:
1. political control of day to day business operations
2. productin quotas
4. price controls
For example the Chilean state copper company CODELCO has been a profitable business for more than three decades and, as far as my reading has been able to determine, none of the above features are part of its standard operating procedure.
I should point out that, on a purely physical level, community finance is already a reality. After all what is it that we are physically investing when we create or maintain infrastructure? Obviously we are investing some part of the output of our currently existing infrastructure in which I include the skill and knowledge of our work force. When a new factory gets build the bricks, lumber, concrete, aluminum, steel, glass, wiring, plumbing, machinery, electronics etc. are created by men and women working in existing enterprises. Physically speaking community investment is the only kind that exists. The private financiers are merely people who have gained the right to make decisions about what kinds of new infrastructure projects will receive input from the existing infrastructure, and who receive a cut of the profits in return for granting the right to receive such input.
From a political point of view (as contrasted with the physical point of view) community investment means that the people who make decisions about what kind of infrastructure projects will receive input are community servants whose role is to serve the public good rather than to line their own pockets. The objection to such a mode of procedure by true believers in private finance capitalism as perfect and eternal form is that self-interested investors are efficient, creative, and productive, while any so-called 'public servants' who attempt to fulfill the same role will inevitably be inefficient, blood-sucking vampires who will seek "to sap and impurify all of our precious bodily fluids". Of course I cannot disprove this claim, but to give an example of another view of the matter I quote the following paragraph from Oscar Wilde's essay The Soul of Man Under Socialism:
"It will, of course, be said that such a scheme as is set forth here is quite unpractical, and goes against human nature. This is perfectly true. It is unpractical, and it goes against human nature. This is why it is worth carrying out, and that is why one proposes it. For what is a practical scheme? A practical scheme is either a scheme that is already in existence, or a scheme that could be carried out under existing conditions. But it is exactly the existing conditions that one objects to; and any scheme that could accept these conditions is wrong and foolish. The conditions will be done away with, and human nature will change. The only thing that one really knows about human nature is that it changes. Change is the one quality we can predicate of it. The systems that fail are those that rely on the permanency of human nature, and not on its growth and development. The error of Louis XIV was that he thought human nature would always be the same. The result of his error was the French Revolution. It was an admirable result. All the results of the mistakes of governments are quite admirable."
I will end my speculations here since I not really capable of evolving a practical plan for the political transformation of society. My primary purpose in this essay is to try to develop an economic language in which it is possible to make intelligible statements about sane economic activity. I am inclined to agree with the English philosopher Thomas Hobbes who wrote the following about the proper use of language in The Leviathan (Chapter IV) :
"Seeing then that truth consisteth in the right ordering of names in our affirmations, a man that seeketh precise truth had need to remember what every name he uses stands for, and to place it accordingly; or else he will find himself entangled in words, as a bird in lime twigs; the more he struggles, the more belimed...
By this it appears how necessary it is for any man that aspires to true knowledge to examine the definitions of former authors; and either to correct them, where they are negligently set down, or to make them himself. For the errors of definitions multiply themselves, according as the reckoning proceeds, and lead men into absurdities, which at last they see, but cannot avoid, without reckoning anew from the beginning; in which lies the foundation of their errors...
So that in the right definition of names lies the first use of speech; which is the acquisition of science: and in wrong, or no definitions, lies the first abuse; from which proceed all false and senseless tenets; which make those men that take their instruction from the authority of books, and not from their own meditation, to be as much below the condition of ignorant men as men endued with true science are above it. For between true science and erroneous doctrines, ignorance is in the middle. Natural sense and imagination are not subject to absurdity. Nature itself cannot err: and as men abound in copiousness of language; so they become more wise, or more mad, than ordinary."
Whether or not we can overcome the madness of the cultural language which now dominates our economic and political thinking is the key question which lies before us.
Taken from Stanley Kubrick's 1964 movie <i>Doctor Strangeglove</i> in which General Jack D. Ripper (played by Sterling Hayden) launches a nuclear war against the Soviet Union in order to thwart an international communist conspiracy "to sap an impurify all of our precious bodily fluids".
June 5, 2009
The Anti-Economy: How the Pursuit of Private Fortunes is Destroying Community Wealth
(This essay was orignally posted on The Oil Drum here.)
Ever since I became aware that oil depletion was a near term problem I have devoted a considerable amount time and intellectual energy thinking about possible ways to structure an economic system so that it does not require constant growth for 'healthy' functioning. If human beings are going to be around on this planet for the long term then growth in resource consumption must to come to an end. I know, of course, that many regular readers of TOD believe that economic growth and growth in resource consumption can be decoupled, if not completely so, then at least sufficiently so that we can comfortably get richer for many decades into the future without mussing the hair of the biosphere. Of course given the fact that a highly respected biologist like E. O. Wilson estimates that species extinction rates have probably already risen to 1000 times prehuman levels, one could argue that we have already gone beyond the 'mussing' stage to the 'falling out in chunks' stage with respect to the state of health of the global coiffure. However, it is not my intention in this essay to try to prove that these optimistic assessments about the extendability of the economic status quo are false. I am simply going assume that a complete decoupling of economic growth from resource consumption is impossible, so that, sooner or later we must stop expanding our total economic output.
Many people have claimed (I am one of them) that our current economic system requires constant growth for healthy functioning. This growth orientation of the economy is oftentimes blamed solely on our financial/monetary system. Granting unearned purchasing power to businesses and/or individuals in exchange for a larger amount of purchasing power in the future requires growth in the net production of use value. The excess purchasing power owed to the financier has to come from somewhere. Either purchasing power is taken away from someone else, or the net production of use value must increase. Since finance as means of robbery cannot be a politically stable institution, the desire for real growth in the production and sales of use value predominates.
Of course even in a declining economy investment in infrastructure may be a desirable thing in order to limit the extent to which the economy will decline. Thus investments in the energy efficiency of buildings, sustainable systems of food production, alternate energy systems, and public transportation could help to put a floor under economic descent. I personally do not see how investments which are intended to limit loss of wealth can be effectively made within the context of our current financial/monetary institutions, although I have occasionally run into people who claim the contrary. If anyone out there thinks that they can explain how investment as a competition to lose the least amount of purchasing power can be made to work effectively, fire away. Personally I think that we need to develop a system of public or community investment, the purpose of which is to insure that economic outputs vital to the community continue to be produced as needed, rather than trying to increase the purchasing power of private investors. I see no reason why such a system of community investment must imply state factories in the Soviet sense or must imply the complete death of private enterprise.
However, it is not my purpose in this essay to give a detailed proposal for financial reforms. Instead I wish to point out a structural feature of our current economic system which would strongly drive a growth orientation even if the financial system had the flexibility to deal with stagnant or declining production. This structural feature is the pursuit of future material security through the institution of private savings.
This claim might seem surprising to some people. What economic action could be more conservative, responsible and straightforward than saving for the future? The problem is that in modern monetary economies savings are really expenditures. If I were to retire when I am sixty-five (Don't I wish!) no physical cache of goods would exist corresponding to my retirement savings. No warehouses under lock and key filled with food, clothing, and fuel dedicated to my exclusive future use will exist. If I go on eating, wearing clothes, and staying warm at night after I retire, it will be because men and women get up out of their beds every morning and go to their jobs to produce economic output, part of which they give to me.
In modern monetary economies one person's savings is another person's consumption. Apart from some necessary amount of inventory, the only real savings is the built up infrastructure of society, in which category I include the knowledge and skill of the men and women who are the brains and hands of that society.
We build infrastructure to use it in the present. We do not build roads that we are going to use decades from now when our current roads have worn out. We do not build empty houses against the day when our current houses will have fallen into ruin. We do not build factories and fill them with machinery and then let them stand idle for decades. We build infrastructure for which we see an immediate use. Therefore our desire to store up value is really a desire to consume resources in the present. When consumer confidence is high and people are in the stores buying home theater systems, cell phones, MP3 players, and digital cameras, then our pension funds and 401K funds are happy.
I have used the example of stock funds because the insecurity of this method of 'saving' is currently painfully evident to many people. However, the same principle applies to more conservative versions of financial savings. For example the deposits in a local community bank cannot be large unless the economic activity of that community is large. Don't get me wrong. I am not arguing that all economic activity and all infrastructure building are bad things. Rather I am arguing that we need a socially agreed upon conception of <b>sufficient</b> economic activity and <b>sufficient</b> infrastructure rather than desiring the increase of these things without limit.
As long as individuals and families have a constant anxiety that they have not stored up enough value to secure their future, a desire for the expansion of current economic output will continue to exist. This fundamental contradiction lies at the heart of the problems faced by modern capitalism; Increasing consumption of resources in the present has been made to give the appearance of providing us with greater security for the future.
In a resource rich world with a smaller human population this appearance corresponded to reality to a substantial extent, as long as our time horizon was short enough. But we have now reached a stage in human history where it seems likely that we are impoverishing our own personal futures by building and maintaining unsustainable infrastructure in the present. As long as future security is pursued in terms of storing up value in an atomized fashion by individuals and families, tremendous pressure will continue to exist to expand total economic production. This desire for growth would continue to exist even if we succeeded in reforming the financial system so that the absence of growth did not automatically produce an economic upheaval in terms of unemployment and job security.
As I said earlier, I do not mean to imply that all infrastructure building is bad. For example, I would feel a lot happier about the future if we had a food production system which preserved top soil and recycled nutrients. This is a sort of infrastructure that I wish we had put into place long ago. The problem with modern capitalism is that it has a short time horizon with respect to the value of infrastructure. On the one hand any infrastructure investment which increases short term production and sales is viewed as a good thing, and on the other hand any infrastructure which puts a floor under our long term productivity, but harms our short term productivity is viewed as being 'unprofitable'.
So what are the alternatives to the pursuit of private fortunes as a means of gaining material security? A detailed practical program for social reforms which would end the destructive tendencies of the current economic system is beyond the scope of this essay and possibly beyond the scope of my unaided intelligence. Nevertheless the broad conceptual principles which could bring about such an economic system are not hard to understand: Voluntary simplicity and mutual support.
By voluntary simplicity I do not mean that we all should live like 18'th century rural small holders. I mean that we need to reach a socially agreed upon conception of 'enough' in the realm of material wealth. Individuals need to reach economic maturity in the same way that their bodies reach physical maturity. If the individual desires increasing wealth without boundary then so will the larger economy. No matter how creative and productive an individual may be their income should not exceed the socially agreed up definition of sufficiency.
I say 'socially agreed upon' because, in spite of libertarian delusions to the contrary, in complex economies with a high degree of specialization of labor, wealth is a social creation. If Isaac Newton and a mountain of gold bars were dumped onto a resource rich planet devoid of intelligent tool users, then he would be rich no more forever. Highly productive people will need some other goal and reward for the full exercise of their creative powers than the amassing of private material fortunes. If satisfactory alternative goals and rewards cannot be found, then any attempt to create a system of industrial production with long term stability is probably doomed.
Mutual support is the other foundation stone of an economy which is not rushing to destroy the commons in the name of private material security. I have already pointed out that real physical savings consist of the built up infrastructure of society, including the knowledge and skill of its constituent citizens. Since mutual support is an objective physical reality, why don't we stop seeking a delusory financial 'independence' and implement a system of universal social security? We need to create a social environment in which people who put their shoulder to the wheel and help to create and maintain the economic infrastructure of society, even in a humble capacity, can have confidence that that infrastructure will be used to support them in their years of declining productivity.
The question of how to implement such a system is complicated. If large scale monetary systems continue to function then one possible element of a system of mutual support is social security payments via a payroll tax as in the current U.S. system. I should point out, by the way that payroll taxies would not necessarily tie retirement security to the procrustean bed of a monolithic national retirement system. Irish economist Richard Douthwaite (among others) has suggested the utility of creating sub-national or regional currencies to complement national currencies. One could imagine similar social security systems associated with these regional currencies, so that people earning income in the regional currency would be building up retirement credits in the regional system. Someone who switched back and forth between jobs earning money in the two currencies during their working life would end up receiving multiple income streams when he or she retired. Therefore this idea does not necessarily preclude greater localization of economic production.
Of course national and regional currencies could also be supplemented by more local forms of currency such as LETS (Local Exchange Trading Systems). People who had formally retired from the larger scale economy might continue to earn income in these local systems on a part time or full time basis, so that they would not be entirely dependent on income from the larger scale economic systems. However, insofar as these large scale economic systems continue to exist and have not become entirely disfunctional, they should contribute to the support of people who have done their part in maintaining the wider economic order.
Many people will claim that all of this talk about mutual support and putting limits on private wealth accumulation is idealistic, utopian nonsense. This accusation of utopianism takes a strong form and a weak form. The strong form asserts that our greedy, acquisitive, competitive, hierarchy loving natures make such a form of social organization psychologically/physiologically impossible. No imaginable historical circumstances exist under which such a society could come into being. This claim of absolute impossibility can neither be proved nor disproved, though certainly lots of discouraging historical evidence can be cited in support of the negative assertion. I prefer to remain agnostic on this issue and to discuss physically possible solutions to our difficulties without reference to any preconceived ideas about the limits of human psychological and social adaptability.
The weak form of the claim of utopianism associated with these economic ideas does not assert absolute impossibility, but rather claims that under the current historical circumstances the likelihood of the adoption of such economic forms is extremely low. If our net productivity starts to decline due to some combination of resource depletion and the negative impact of human economic activity on the biosphere, then cultural inertia guarantees that the current power structure will flail about trying to preserve the status quo rather than attempting to serve the real needs of the majority of the population.
I have absolutely no doubt that, in the face of a productivity decline, real understanding of the nature of our situation and realistic proposals for alleviating the associated suffering will be hard to come by. However, if the unique and unvarying response to this situation, for all time to come, is a vain attempt to restore the 'normality' of exponential economic growth, then it is hard to see how the decline of industrial civilization can stop anywhere short of neolithic villages. I prefer to assume that the case is not so desperate and talk to other human beings about our common dilemma as if I thought that intelligent cooperation were possible.
June 5, 2009
Energy Payback Time and Energy Production Boot Strapping
Energy has to be expended to build and install renewable energy generators such as PV panels, solar concentrator systems, wind turbines etc. The length of time required after installation for all of the energy consumed during the manufacturing and installation to be returned from the output of a given renewable energy source is called the energy payback time. If energy paybacks times are long then initial outlays of energy required to install renewable generation can have negative economic consequences.
Let's attempt to quantify these consequences. I define the following variables:
C0 : Initial yearly net energy supplied from finite energy sources which are being depleted.
r : Yearly depletion rate as a fraction of C0. That is in year number two the available energy is (1-r)×C0.
f : The fraction of the net energy C0 that is used to install renewable energy capacity
P : Energy payback time in years of the newly installed renewable energy generators
For mathematical simplicity I will assume that all of the renewable energy generators are turned on at the beginning of the year. So during the first year we spend energy f×C0 building and installing renewable energy generators which we turn on at the beginning of the second year.
During the first year the energy available for producing goods and services other than energy (I call this 'useful' energy) is given by:
U1 = (1-f)×C0
During the second year the useful energy is given by:
U2 = (1-f)×[(1-r)×C0+(f/P)×C0]
The first term inside the square brackets is the energy output from the depleting energy sources and the second term is the energy output from the newly installed renewable generators. We have to multiply by a factor of 1-f since we need to go on installing new generation to make up for the continuously depleting conventional energy sources. If we wish to avoid energy descent then we require that U1=U2. Inspection of the equations above reveal that value of f which makes U1=U2 is given by:
To be concrete suppose that the energy lost from conventional sources is 0.05×C0, and the energy payback time of the renewable generators is P=5 years. Then f=0.05×5=0.25. That is we would have to sacrifice 25% of our net energy output to install new renewable generation. If we install the same amount of renewable generation every year and if the energy descent of the conventional sources was strictly linear so that the losses remain 0.05×C0 per year, then after 20 year the conventional sources would be exhausted and they would have been replaced by an equivalent capacity of renewable generators. The price for avoiding energy descent is a 25% decrease in useful energy over a period of 20 years.
If the energy payback time is greater than or less than 5 years then the energy price of avoiding energy descent goes up or down. For example if the energy payback time were 1 year then we would only have to sacrifice 5% of our useful energy to avoid energy descent. If energy payback time were 20 years then it would physically impossible to avoid energy descent since 100% of our energy would have to be dedicated to installing new capacity.
Similarly if the rate of enery depletion were slower or faster the energy price of avoiding energy descent would be smaller or larger.
June 4, 2009
According the the U.K. Sustainable Development Commission the Economic System is Broken with Committment to Growth being Defect Number One
The Sunday Herald, a leading Scottish newspaper, recently published an article about a report written by the Sustainable Development Commission (SDC), a group of 19 experts charged with advising the Scottish and UK governments environmental issues. The title of the report is Prosperity Without Growth. Here are some excerpts from the Sunday Herald article:
THE ECONOMIC system is broken, and attempts by governments to fix it by kick-starting growth and consumerism are "delusional" and "pathological", the Westminster and Holyrood governments will be warned by their own advisers this week.
The pursuit of economic growth, founded on the increasing consumption of material goods, has failed to bring social justice, prosperity or happiness, the report says.
"The narrow pursuit of growth represents a horrible distortion of the common good and of underlying human values," the report concludes. "The market was not undone by rogue individuals or the turning of a blind eye by incompetent regulators. It was undone by growth itself."
The report presents a fundamental challenge to the economic policies being pursued in London and Edinburgh, raising questions about some of the basic tenets of modern capitalism. We are living in an "age of irresponsibility", it says.
"Questioning growth is deemed to be the act of lunatics, idealists and revolutionaries, but question it we must," says Tim Jackson, a professor at Surrey University and the SDC's leading economics expert.
"The myth of growth has failed us. It has failed, spectacularly, in its own terms, to provide economic stability and secure people's livelihoods."
A society founded on the "relentless pursuit of novelty" undermines social well-being. "The economy itself is dependent on consumption growth for its very survival," the report says. Market economics have to be questioned and consumerism has to be reversed, the report urges.
I find it quite amazing that language like this could have come from any government appointed commission. In the U.S. I cannot imagine similar language coming out of a government funded study. Maybe our thought control is more advanced than that of the U.K.
If you read the whole article you will see that the reaction of the Scottish and U.K. governments to this report was quite negative. This negativity is about as surprising as the blue tint of the sky or the Catholicism of the Pope. I find it interesting, however, that the only counter weight given to the spokespeople of the SDC is comments by a couple of government ministers. The Sunday Herald does not quote some other group of 'experts' who have a more optimistic view about the potential of 'clean technology' to preserve economic growth into the indefinite future. Without endorsing the views of the SDC report, the Sunday Herald reporter seems open to the idea that these views might actually be correct.
April 2, 2009
eSolar power tower technology licensed by CO2 splitting company Sundrop Fuels
A while back I read about a group Los Alamos scientists who had developed a method for using solar energy to split carbon dioxide (CO2) into carbon monoxide (CO) and oxygen. They achieved this result by heating CO2 gas to very high temperature in concentrated sunlight. At these high temperatures the CO2 molecules are directly ripped apart by thermal energy. I call this method of chemical decomposition the sledgehammer approach to converting sunlight into chemical energy. Once the CO2 molecules have been split into CO and oxygen the two gases have to be separated to prevent them from recombining when the gas cools down. The Los Alamos group who called themselves LARE (Los Alamos Renewable Energy) did not give any information about how they achieved this separation. One possible method would be a semi-permeable ceramic membrane.
You might be asking yourselves: What does producing carbon monoxide from carbon dioxide have to do with renewable energy? The answer to this question is that carbon monoxide is a combustible gas with a high energy content per mole (or per molecule), higher, in fact, than hydrogen gas. It is not considered to be a good fuel gas because of its low energy content per kilogram (not to mention the fact that it is a deadly poison). However, carbon monoxide can be transformed into hydrogen via the water gas shift reaction:
The H2 thus produced has about 92% of the energy content (HHV) of the original CO (assuming 100% conversion). Therefore this process can be thought of as an indirect method of splitting water to produce hydrogen. At the end of the process the CO2 is recovered so that it can be recycled to produce more hydrogen.
I should point out here that I am not a promoter of the so called "hydrogen economy". For a number of reasons I believe that hydrogen is a poor choice for an energy carrier. However, hydrogen can be further processed into more convenient chemical fuels, so that if a source of renewable hydrogen became available we could probably find a way to utilize it. At the end of this post I will consider briefly possible transformations of hydrogen into more useful energy carriers.
The question I wish to address right now is whether their is any reason to believe that the method of production devised by the LARE team can produce hydrogen at a reasonable cost. Considering the fact that the LARE group has licensed their process to a private startup company called Sundrop Fuels, it appears that they believe that real commercial potential exists. Considering that the landscape is littered with the corpses of renewable energy startups that did not deliver on their promises the mere existence of such a company should not cause any great excitement Still, in the world of renewable hydrogen startup companies are few and far between. Most of the time when you read about the results of people doing research on renewable hydrogen production you hear language like: "Yes we have split water in the laboratory and produced some hydrogen, but a lot more research and some major technological breakthroughs are needed before this idea can be converted into an economical method for producing hydrogen". So the fact that a group of Los Alamos scientists claim to have already developed a practical process for producing hydrogen may have some significance.
On the other hand the direct thermal splitting of water using concentrated sunlight has been tried and rejected as an impractical process. Extremely high temperatures are required to obtained a reasonable efficiency, an no one has figured out a practical method for separating the hydrogen from the oxygen at these high temperatures. Is their any reason to believe (apart from the assertions of the LARE team that this feat is any easier to accomplish for carbon dioxide than for water?
In searching for information on this subject on the Internet I found an interesting paper published in 1986. These researchers asked precisely the same question as I did above. That is they asked whether CO2 is a better candidate for direct thermal splitting than H2O which achieves only 4% dissociation at 2400ºC. They concluded that the answer is yes the thermal dissociation of CO2 is more favorable than H2O at temperatures around 2000ºC. Furthermore they build an experimental reactor using calcia-stabilized zirconia as a semi-permeable membrane to separate the oxygen and carbon monoxide and succeeded in converting up to 20% of the input CO2 into CO at 1960ºC. They also said that they believed substantially higher dissociation rates could be achieved if the ionic conductivity of the membrane was improved. Of course "easier to split than water" is not the same thing as "economically practical", but this result gives some reason to hope that the Los Alamos scientists are not just blowing smoke.
One reason that I am skeptical about the economics of this process is that the original implementation described by the LARE team (This description is no longer available on the web.) involves the use of high solar concentration parabolic mirrors with small processing furnaces held at the focal point by long carbon fiber booms. This kind of configuration seems likely to have high capital costs and probably high maintenance costs as well.
Therefore I was interested to learn recently that Sundrop Fuels has signed an agreement with eSolar to license their power tower solar technology. Power tower technology uses an array of mirrors to focus solar energy on a relatively large central tower. Thus the carbon fiber booms and the miniature processing furnaces on each parabolic dish are eliminated. The array of small flat mirrors used by the eSolar power tower may also offer a cost advantage compared to the large parabolic mirrors of the original LARE design. I am not holding my breath waiting for cheap hydrogen to come rolling out of the desert, but this licensing decision by Sundrop Fuels is interesting.
Now I wish to briefly discuss possible uses of this hydrogen, assuming that it can be produced at a reasonable cost. Neither compressing it into tanks and shipping it to end users nor transporting it in pipelines is likely to be economical. The LARE team's original proposal was to store the hydrogen locally and use it as a fuel to power steam turbines. The idea is that the same solar field would produce both steam and hydrogen, and the hydrogen would be used as a backup fuel to power the steam turbines when insufficient sunlight is available (i.e. at night or during cloudy weather). I am not convinced that this scheme would be any cheaper than proposals for thermal storage using nitrate salts, and it would not address the need for long term storage to even out seasonal changes in insolation. Hydrogen storage is expensive and storing months worth of supply is probably not practical.
Another storage option is to chemically transform the hydrogen into some form that can be stored more conveniently. One possibility is to combine hydrogen with nitrogen to produce ammonia (NH4). The Haber-Bosch process is a well established for accomplishing this synthesis. The chemical equation for ammonia synthesis is:
The energy content (HHV) of the resulting ammonia is 91% of the input hydrogen (assuming 100% efficiency of synthesis). Ammonia has some disadvantages as a fuel which I have discussed elsewhere. It cannot be used as a drop in replacement for hydrocarbon fuels in internal combustion engines or in gas turbines. However, I see no reason why it could not be used to heat water for a steam turbine; The great advantage of external combustion engines is that they are fuel flexible.
I have never heard of anyone attempting to run a steam turbine using ammonia as a fuel, but, naturally, there has not been much motivation to do so. At present ammonia is most cheaply synthesized using hydrogen derived from natural gas via steam reforming and the water/gas shift reaction. Since natural gas is itself a high quality fuel and nearly one third of its energy content is thrown away in the process of turning it into ammonia, no good motivation exists for trying to use ammonia as fuel. Only if an economical source of renewable hydrogen became available would it make sense to consider ammonia as a fuel.
If the performance of nitrogen as a fuel for running steam turbines was unacceptable one could synthesize methanol via the reaction:
The resulting methanol would have 88% of the energy content of the original hydrogen. In order for such a fuel cycle to be carbon neutral one would have to capture the CO2 generated during methanol combustion so that it can be recycled into more methanol. Obviously capturing and storing CO2 would add to the complexity and cost of the fuel cycle. Still, the cost of carbon capture from methanol might be cheaper than carbon capture from coal since the carbon to hydrogen ratio methanol is 0.25 compared to typical values of 1.0 for coal. The use of ammonia as an energy storage medium eliminates the problem of recycling a secondary element since nitrogen can be extracted from and returned to the atmosphere.
By no means do I regard renewable hydrogen as a holy grail that will save our civilization, particularly so if 'civilization' is taken to mean growth based private finance capitalism. Previous readers of this website (if there are any such creatures) will know that I do not believe that this beast can or should be saved. The last thing that any person who desires the long term welfare of humanity should be hoping for is a dirt cheap, carbon free alternative to fossil fuels. We should hope that renewable energy sources are expensive enough to bring to an abrupt end to our dreams of endless increases in material wealth, but cheap enough to support modest but comfortable life styles.
 Yutaka Nigara and Bernard Cales, Production of Carbon Monoxide by Direct Thermal Splitting of Carbon Dioxide at High Temperature, Bulletin of the Chemical Society of Japan, Vol.59 , No.6(1986)pp.1997-2002
January 1, 2008
The freedom to assert that 2+2=4 does not mean much if no one is paying any attention
Participating in discussions about the implications of peak oil and other resource limitations on the future of human economic development is quite depressing. Either the reality of limits to growth is denied outright; or these limits are relegated to a future so distant that no living person need be concerned about them; or near term limits to growth are acknowledged to be real but any practical discussion of alternatives to a growth oriented economy is rejected as useless, since human nature is such that greed and material acquisitiveness will predominate at the individual and familial level for all eternity.
The situation is as if you had discovered the helio-centric theory of the solar system, and at the same time you realized that the consequences of that theory had very serious negative implications for future human welfare unless appropriate actions were taken.
Naturally you would wish to discuss the consequences of the theory and the and the actions required to stave off disaster.
Instead of finding eager co-participants for this discussion you meet with three different reactions:
A. The helio-centric theory of the solar system is false. Only a deluded moron could believe such nonsense. Quit wasting my time with useless diatribes.
B. The helio-centric theory of the solar system might conceivably be true, but the negative consequences which you are predicting are in the distant future. We can continue to party down for the rest of our lives and leave the responsibility saving the race to our great grandchildren. Quit wasting my time with useless diatribes.
C. The helio-centric theory of the solar system is correct and bad times are coming. However, human nature requires that we believe ourselves to be at the center of the universe. No practical action will ever be taken based on the helio-centric theory. All we can do is wait for the hammer to fall. Quit wasting my time with useless diatribes.
My diatribes may indeed be useless, but I cannot forgo delivering them anyway. Our current economic system defines economic 'health' as manufacturing and selling more stuff this year than we did last year. If people are in the shopping malls buying Blackberries, home theater systems, and the latest and greatest kitchen gadgets then our pension funds and 401K funds are happy. The faster we consume resources the richer and securer we all become. Not! Our economic system is functionally insane, and yet to suggest any serious alternative to competitive accumulation as our fundamental economic paradigm is to be labeled as a socialist idiot who is completely out of touch with 'reality'. Private finance capitalism is undoubtedly a reality, but not all things that are real are good for us. Clinging to the paradigm of everlasting growth will have serious, real world consequences for humanity. Refusing to think about these consequences will not make them less harmful.
November 23, 2008
The Credit Crisis: Is this the start of a global financial meltdown? And if it is should we care?
The financial news is increasingly bad. The stock market is heading south and potential bank failures are lining up one after another. Is this 1929 redux? I do not think anyone really knows for certain, but the situation is pretty grim. Dan Sweeney over at Juice: Alternate Fuels World has this to say about the comparison between today's economic situation and that of 1929:
"And, interestingly, the economy then looked much stronger overall than it does now. Inflation was nearly nonexistent. The U.S. was the dominant manufacturing power and experiencing a heady growth in productivity as the burgeoning consumer culture of the time soaked up more and more manufacturing capacity. Consumer debt was low and individual savings were high. Furthermore, real incomes were ascending rapidly. The Federal budget was balanced, taxes were low, military spending was minimal, and the mood of the country on the eve of the troubles was ebullient. America was confident, prosperous, and generally pleased with itself. America was considered a very good place to do business.
Furthermore, the major American banks, headed by the almighty House of Morgan, had a history of behaving responsibly. The Morgans liked orderly markets, and they enforced order and market discipline ruthlessly for decades. J. P. Morgan would have destroyed any financier who even suggested something like securitized debt."
However, in my mind the question of whether the current economic crisis is the financial 'big one' or just the start of a nasty recession is beside the point. Any economy that has to grow continuously in order to be 'healthy' is fundamentally cancerous and will eventually self-destruct. In our economic system even though we are a hundred time richer than our great grandparents, if we are not getting still richer by 3% per year we are 'dying'. Anyone whose brain has not been anaesthetized by the propaganda system of capital markets could figure out in half a minutes's thought that any economic system organized on this principle must sooner or later run into a wall. "If it be not now, yet it will come".
If, on the other hand, we were not concerned with growth or with increasing the size of our pile toys, and instead concentrated on producing truly essential goods and services as efficiently as possible and on sharing this output equitably, then the potential exists for maintaining a good quality of life with a much lower consumption of resources. The problem is that in the developed world there is almost zero social intelligence available for achieving this kind of economic focus. Any suggestion of a system of economic production which departs from the capital market driven / every nuclear family for itself paradigm is met with derision and contempt as discredited socialist idiocy. This derision comes from both the liberal and the conservative ends of the political spectrum. Capital markets and middle class security gained through private financial investment are perfect and eternal forms. We to need reform and regulate the activities of private financiers, but the right of rich people to get richer without lifting a finger is the only possible basis of a free society.
There is a scene in George Orwell's novel 1984 in which the main character is is hooked up to some kind of electrical machine, and under its influence he concedes for a moment that 2+2 might be equal to five rather than to four. The torturer who achieves this triumph of mind control is an absolute amateur compared to propagandists for our current economic system. Ninety-nine people out of one hundred walk down the street every day believing that two minus two equals a million. The faster we consume resources the richer we get. Forever. World without end, amen.
In order for true social intelligence to be awakened with respect to creating an economic system with long term stability, it is necessary that the dream of middle class financial security based on private investment should be destroyed. Destruction must precede creation. In South America, where large segments of the population are thoroughly convinced that capital markets are not serving and are never going to serve their practical economic interests, the process of creation has begun. Our turn will come.
October 9, 2008
The real science of political economy, which has yet to be distinguished from the bastard science, as medicine from witchcraft, and astronomy from astrology, is that which teaches nations to desire and labor for the things that lead to life; and which teaches them to scorn and destroy the things which lead to destruction.
Roger K. Brown
Rogerkb [at] theworldisfinite [dot] com