Saturday, January 21, 2012

The economics of staying alive

"Change before you have to." (Jack Welch)

In 1977, the editors of Mother Earth News published a sprawling "Economic Outlook" that present a number of bold, disturbing assertations that emphasized our need for a new economic model:
-Capitalism, as we know it, is designed to exploit newly discovered resources and will flounder when we run out of new frontiers to conquer.
-The human population continues to grow rapidly.
-We can recognize and predict coming shortages of oil, irrigation water, and arable land.
-The health of our current world economy is contingent upon continued population growth and the discovery of new natural resources.
-We need new economic systems to support a "steady state" economy-- an economy of stable size with only mild flyctuations in population and consumption of energy and materials.
To suppor their thesis, the editors quoted historian Walter Prescott Webb, whose 1951 book The Great Frontier warned that when we run out of natural resources, our economic systems will stop working.
[The editors] wrote: "Western man's clever technology, self-motivation, work ethic, economic system, and regard for the individual all came after and are all solidly rooted in the windfall resources and profits of The Great Frontier... And now that most of the cream has been skimmed from that windfall, capitalism (the economic system so ideally suited for the exploitation of a seemingly endless storehouse of natural riches) will decline, prosperity will slip through our fingers...
"Western Man's 450-year expansionary binge-- which was fueled by inexpensive, plentiful energy and other natural resources--is now drawing to a close. And, just as Walter Prescott Webb predicted... the industrialized nations of the world are having a difficult time understanding what is happening to them."
It is now 2012, 61 years after Webb's warning. The global recession is now about 4 years old. Are we "having a difficult time understanding" what is happening to us? Yes, I think so.
Do we still need to invent a so-called "steady-state" economy? Yes, I think so. We need it now more than ever.
Humanity faces a dilemma. On one hand, our habitat won't allow the human population to expand forever. Resources will eventually run short. But if the global human population stabilizes, we will face an unprecedented economic problem. Prosperity, as we've known it, depends on an expanding human population to support an expanding economy.
A Ponzi scheme, also known as a pyramid scheme, is a scam in which a con artist promises big returns, which he fradulently generates from the contributions of later investors. Bernard Madoff is the most notorious recent perpetrator of such a scam. He raised ens of billions of dollars from thousands of investors before he went to jail in 2009.
Every Ponzi artist faces a day of reckoning. Eventually, he runs out of new resources.
Brown quotes a 2002 study by t he U. S. National Academy of Sciences that concludes we have been consuming resources we cannot hope to replace since about 1980. Brown points out that, as of 2009, all the world's major aquifers were being depleted for irrigation, we were pulling fish out of the sea faster than they could reproduce, and we were draining our reserves of cheap energy while not investing much in new energy technologies.
Modern strends are proving Webb and Brown correct. Lifestyles are eroding while basic resources such as food and energy get more and more expensive. In our present recession, each time a tidbit of positive employment news is revealed, fuel prices spike and new jobs dry up. The housing market is in the dumps, but farmland values are soaring.
It begins to feel liek we're encountering a natural limitation to our expansion, doesn't it?
The connection between population growth and economic prosperity was clearly recognizable 600 years before our Economic Outlook was published. One of the earliest recorded treatises on economic expansion was writted by Arabian philsopher Ibn Khaldun in 1377:
"When civilization [population] increases, the available labor again increases. In turn, luxury again increases in correspondence with the increasing profit, and the customs and needs of luxury increase. Crafts are created to obtain luxury products. The value realized from them increases, and, as a result, profits are again multiplied in the town. Production there is thriving even more than before... All the additional labor serves luxury and wealth, in contrast to the original labor that served the necessities of life."
More than six centuries ago, this Arabian philosopher understood the basic machinery pretty clearly. Economic growth has been generated by population growth, augmented by technology and motivated by improving lifestyles.
So what do we do when population growth is no longer sustainable?
We must create new systems for distributing value and maintaining prosperity for a stable human population. But we've never had to do that before. Maintaining prosperity in a stable population will require new tools.
Instead of stubbornly clinging to economic models that aren't working, we should be hard at work inventing new ones. Unfortunately, much of our energy is being channeled into various forms of denial.
The spectacular collapse of the $100 billin energy corporation Enron at the beginnign of hte 21st century offers a chilling illustration of our capacity to ignore evidence in favor of comfortable self-delusion. The smarted financial analysts in the world's most successful economy bought into Enron's manager's wild validations because they profited fromt hat belief. In spite of abundant evidence to the contrary, Wall Street believed Enron represented about $70 billion in assets because that belief temporarily benefited all of them--management, bankers and investors. For a time, skepticism profited no one. When those assets were finally called up on to generate cash, however, billions in shareholder value evaporated in just a few weeks.
Financial experts tend to believe what it's profitable for them to believe.
It is not popular to suggest that our planetary asset are not sufficient to cover our long-term needs. No one is making a profit from this kind of skepticism. We are exaggerating the durability of our natural resources because, in the short term, it's profitable-- and soothing-- to do so.
So far, technology has accommodated and augmented human population growth. We've seen our "green revolution" spread across the globe and feed multitudes. But now we know there were hidden costs, and that modern agriculture must adapt to natural limitations in order to be sustainable. And, indeed, the green revolution spurred more population growth.
In our fantasies, space travel solves our problems. One attraction of science fiction is its ability to extend the human frontier to the limits of human imagination. Star Trek's mission statement declaimed our potential to "explore strange new world... to boldly go where no man has gone before." In a fictional world, our current economic theories and philosophies might carry us on, uninterrupted, to flourish across the universe.
Unfortunately, right now we can fly no farther than our own small, sterile moon, and lately we've concluded that we can't even afford to take an occasional exploratory jaunt into our own upper atmosphere. We're too busy rebuilding levees and guarding oil wells down here on the ground.
Our economic tools will be obsolete long before we perfect intergalactic space travel.
In fact, they are obsolete today. It's time for new ideas. The founders of Mother Earth News offered some examples 34 years ago.
-Learn how to grow our own food and generate our own power
-Convert to wood heat, solar hot water and passive solar architecture
-Build a greenhouse, plant a garden, start a flock of chickens, feed leftovers to a pig, raise rabbits, get some milk goats
-Learn a basic trade and set up a home-based business
-Dig a root cellar
These ideas are still new, because they haven't yet been popularly acknowledged. The same goes for the writings of Walter Prescott Webb from 60 years ago. Today visionary writers such as Umair Haque (author of The New Capitalist Manifesto) and Michael Strong (author of Be The Solution) are adding their voices to the conversation, suggesting that capitalism itself needs to adapt.
"And what if the worst never comes to pass? What if our leaders really do... work their magic so well that times... do nothing but get better and better from now until eternity? Wonderful! But keep right on tending that garden and converting yourself to solar energy anyway... you'll still be ahead of the game. It's hard to beat the satisfactions of self-sufficiency and independence."
(From Mother Earth News, Dec 2011/January 2012, by Bryan Welch)

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