The Delusion of Economic Self Reliance

The Delusion of Economic Self Reliance

As Bernard Lietaer points out in his book, The Future of Money, money is not a thing. If you were stranded alone on a desert island and had a pocket knife, or a hatchet, or a box of matches, or a cooking pot, these objects could be of use to you. But if you had a certified check for $100,000 it would be merely a piece of waste paper. Money is the symbolic right to take possession of or consume the economic output of other people. Ideally money represents the economic output that its possessor produced in the past so that the exchange of money for goods is really an indirect exchange of goods for goods. The only true source of wealth is a functioning economic system with healthy, skilled workers, well maintained production and distribution systems, and adequate sources of energy and raw materials. Money, bank accounts, stocks funds, bonds, etc are merely an accounting system which keeps track of how much output from that system various individuals are allowed to receive. If you retire someday, you will continue to receive economic output from the people who are still working. These people will be willing to support you only if they believe that the system is going to supply them with support and security as well. If a widespread breakdown in economic production occurred, with massive unemployment, with a large fraction of the population struggling to provide themselves with food, clothing, shelter, medical care, etc., the idea that the system would go on happily providing you with a materially rich lifestyle just because of some numbers beside your name in an electronic accounting system is nonsense. In a complex economic system with a high degree of specialization of production jobs, self reliance is a delusion.

A fact which is truly amazing to me is that, in the current climate of intellectual thought about economics, any suggestion that a cooperative effort to assure the long term health of our economic system should replace competition between individuals to maximize their right to consume economic output is automatically rejected as absurd idealism. This rejection comes from both the political right and the political left. The left promotes ‘green’ economic growth in which tax policy, regulation, subsidies etc. will be used as policy instruments which will allow us to compete hard and get wealthier for the rest of the century without damaging the biosphere or depleting natural resources. Lester Brown of the Earth Policy Institute, author of the book Plan B 2.0 heavily promotes this idea, although he substitutes the word ‘development’ in place of ‘growth’. In the first part of Plan B 2.0, called A Civilization in Trouble, Brown gives a catalog of the problems facing the global economic system which makes you want to go into your bedroom, curl up in a fetal position on the bed, and never venture forth into the world again. But in his chapter on building a new economy his first action is to go down on his knees, touch his forehead to the ground (I am speaking metaphorically, of course), and give praise to the efficiency of the market (meaning private finance capitalism). His idea for saving the world is to make the market ‘tell the ecological truth’ by levying taxes on environmentally destructive behavior. This idea is not bad insofar as it goes, but what if the ‘ecological truth’ is that we need to produce and consume a lot less goods and services than we do now? That is what if our economy needs to shrink? How is the stock market going lead us though such a transition?

Of course, Brown is correct that private finance capitalism is efficient. It is efficient at carrying out the task it was designed to achieve; To increase the total volume of economic exchanges at the maximum possible rate. However, in a finite world in which human economic activity is pushing up against the limits of that world to provide resources for us and to absorb our wastes, extolling an economic system which is efficient at carrying out an insane goal is incredibly foolish.

I realize than many people will accuse me of the dreaded heresy of being anti-growth. This charge is absurd. No rational person is anti-growth. I was once a little baby boy and I grew up to be man, and I am glad that it happened. My growth was a good thing. However, I am also glad that I am not forty feet tall and still growing. Only someone who is completely and utterly insane wishes to go on growing forever. Yes, those parts of the world where average incomes are less than $1 per day need growth in the production of a variety of economic goods and services. But the idea that the Americans, the Europeans, the Japanese, etc. need to go one increasing the size of their pile of toys to the end of the century and beyond is absurd. Growth is a means to an end and not an end in itself. Unless we can develop an idea of ‘economic maturity’ similar to the idea of physical maturity in human beings, our economic system will go on being a cancer on the face of the earth.

My own preliminary attempt to envision such economic maturity will be described in later posts on this web site. We really need to start thinking seriously about human productive systems in the long term, rather than just putting out heads down, accumulating money, and praying that the stock market will stay healthy for another few decades. Economic orthodoxy must be challenged.

March 7, 2007