A Sustainable No-Growth Economy? Is That Possible?
So, bad news all around for the entire world’s economy despite encouraging words from President Obama last night. When we stop reeling from the overwhelming fact that our economic system just spun out of control (though it will probably come back) we’ve all got to ask ourselves the big questions: How did this happen? Did I personally contribute? Can I live my life in accordance with my values of environmental sustainability and still function in our capitalist system? Yeah, so I know that last question just sent 99% of readers clicking away to the latest Oscar gown mishaps…
If you’ve made it this far, here’s the thing that I’ve been tripping on (because I’m generally tripping on something!): macroeconomics shows us that our capitalist system requires continual growth. Continual consumption of natural resources and environmental degradation as a result. Some authors even call it carbon-based growth to differentiate between a petroleum based economy and… something else. What else?? Here’s a chunky quote about our petroleum-based economy:
Research by the McKinsey Global Institute and McKinsey’s Climate Change Initiative finds that reconciling these two objectives means that “carbon productivity,” the amount of GDP produced per unit of carbon equivalents (CO2e) emitted, must increase dramatically. To meet commonly discussed abatement paths [to stop global climate change], carbon productivity must increase from approximately $740 GDP per ton of CO2e today to $7,300 GDP per ton of CO2e by 2050—a tenfold increase. This is comparable in magnitude to the labor productivity increases of the Industrial Revolution. However, the “carbon revolution” must be achieved in one-third of the time that economic transformation took in the Industrial Revolution if we are to maintain current growth levels while keeping CO2e levels below 500 parts per million by volume (ppmv), a level that many experts believe is the maximum that can be allowed without significant risks to the climate.
What this means is that it may be impossible to correct global warming using our current economic system. We need to examine our economic system in order to support sustainability, living within the means available to us without further damaging our environment. The financial meltdown, global climate change, they’re both symptoms of one REALLY BIG problem: capitalism without sustainability.
We kind of already knew that, but somehow no one seems to ever just say it outright. Back to the finance world, aka the witch’s brewpot of capitalism.
I’ve covered some of the “how it happened” question, and won’t go there with this post because our topic now is the future. The “did I personally contribute” question is valid when we look at how we can change. Do you invest in mutual funds that in turn own stocks from companies you cannot support? How about your 401K? Those greedy-ass investment bankers who tanked our economy were leveraging something: YOUR money. Do the due-diligence and examine your investments to ensure they’re in line with your values. You may own Exxon stock and not even know it. Do you buy too much plastic on a daily basis? Lord knows I do, and it drives me crazy! I hate plastic, but even Trader Joes wraps their veggies in it! (yup, time to go write that email to TJs corporate office…) Okay, so we get it on the environmental impact of daily habits. We’re saving up for the Prius or better yet, the Aptera. But we still participate every day in an economic model that demands continuous expansion to sustain it’s health. We’re hurting now because of shrinkage. Everything we’ve been taught tells us this shrinkage is BAD. People are losing jobs and houses. We haven’t even BEGUN to see the impact on retirement savings that have now evaporated. Life is getting harder.
But the pain is necessary. Until we find a widespread and sustainable form of energy production (beyond resource depletion), the world cannot support a western lifestyle for everyone on earth. What does a sustainable economic model look like?
Maybe socialism, and definitely with a LOCAL emphasis. For us Americans, rugged individualists that we are, there’s always the pain-threshhold question associated with socialism: how much pain would you like to subject your neighbors to before you’ll pay more taxes to help them? How about someone else’s neighbors? How about rude people? How about lazy people who just lie and don’t work? Yup, gets us every time. We cringe at socialism. But I guess my argument is that it provides a cushion against economic contraction, which we need if we are going to try for zero-sum growth, meaning some periods of expansion balanced against some periods of contraction. We need to pull back from globalism and back to local self-sufficiency. My mind reels at how Luddite this starts to sound, but we really do need to stop consuming plastic crap from overseas, and support local economies. Green Party style.
Here’s a quote (my emphases added) from an excellent article on no-growth economics by Stephen Stoll in Harper’s magazine:
“Our trouble lies in a simple confusion, one to which economists have been prone since the beginning of the Industrial Revolution. Growth and ecology operate by different rules. Economists tend to assume that every problem of scarcity can be solved by substitution, by replacing tuna with tilapia, without factoring in the long-term environmental implications of either. But whereas economies might expand, ecosystems do not. They change—pine gives way to oak, coyotes arrive in New England—and they reproduce themselves, but they do not increase in extent or abundance year after year. Most economists think of scarcity as a labor problem, imagining that only energy and technology place limits on production. To harvest more wood, build a better chain saw; to pump more oil, drill more wells; to get more food, invent pest-resistant plants.
That logic thrived on new frontiers and more intensive production, and it held off the prophets of scarcity—from Thomas Robert Malthus to Paul Ehrlich—whose predictions of famine and shortage have not come to pass. The Agricultural Revolution that began in seventeenth-century England radically increased the amount of food that could be grown on an acre of land, and the same happened in the 1960s and 1970s, when fertilizer and hybridized seeds arrived in India and Mexico. But the picture looks entirely different when we change the scale. Industrial society is roughly 250 years old: make the last ten thousand years equal to twenty-four hours, and we have been producing consumer goods and CO2 for only the last thirty-six minutes. Do the same for the past 1 million years of human evolution, and everything from the steam engine to the search engine fits into the past twenty-one seconds. If we are not careful, hunting and gathering will look like a far more successful strategy for survival than economic growth. The latter has changed so much about the earth and human societies in so little time that it makes more sense to be cautious than triumphant.”
Have We Really Made Progress?
Read up, people! Another installment from guest blogger Madame LaFarge:
Beginning with Neanderthal hunting and gathering, what most anthropologists will agree upon is that men tend to interact with other men in groups.
What do men want? This is a question usually asked about women, I know. But let’s take a look at what men want. We can begin by asking what do men do? Well, they usually work – outside the home. If men have made societal structures for the optimum aggrandizement of themselves, those main areas of work are: war, sports, and business. I suppose we may add art as a fourth category, for those so inclined. The American mythologist Joseph Campbell believed that men want to be heroes. Fair enough. Each of these work categories can claim heroes aplenty.
Little Johnny comes into world as preferred stock, no matter where he is born. His parents, grateful that they have a son to take care of them for the rest of their lives, shield and protect him from criticism, encourage him to develop his many talents, and warn him about those things that will ruin his life.
Depending on how much power and money his family has and where he lives will pretty much determine Johnny’s future. If he has drawn a short straw in both of the above, his work could be war. Of course, wars need generals too, so, as usual, the upper class men will dictate whatever ‘needs’ to be done. If you have an entire country made up of short straws, you may have tribal factions like the Taliban in Afghanistan, the Tamil Tigers in Sri Lanka, and other terrorist groups who, like the generals, have chosen war as their lifelong occupation.
By now, we all know that honor is writ large for these straw men particularly. How did honor come to play such an important role in their lives? Poverty surely, but also, I think, more importantly, embarrassment. Embarrassment because the rest of the world can see the backwardness which, while desperately clinging to old tribal customs, has left them totally unprepared to go forward as equals in the modern world.
In war, I can see the fairness somehow, of armed men killing other armed men. What fails to make sense to me is how anyone in any fit of rage, could commit atrocities against unarmed females; like throwing acid on the faces of little girls who dare to go to school; fathers, husbands, and brothers killing or disfiguring daughters, wives and sisters for the sake of their honor. These men consider women as entirely extraneous to themselves. After all, what society would cover their women in sacks from head to toe, like they were shameful things to be hidden? Again, the shame is with these men themselves.
The measurement of a man’s progress could be in the way that he views women. If hormones are the culprit, which seems to be the case, as the sexes become increasingly interchangeable, then must we wait patiently for men to evolve? Do we have the time necessary to achieve this goal? If business is the final frontier, if success for men is the adulation and recognition from other men, why not add saving the world to the list?
It All Started With Fractional Reserve Banking…
I started out with a refresher on macroeconomics (an area I think needs to be taught in high school as a requirement) and the operations of the Federal Reserve Bank. I was trying to understand what the options were with regard to the great stimulus package, and what we could expect if we did not to pass one. How bad could it get? There’s positively a glut of opinion, as you’d expect, about whether we’re completely screwed, temporarily screwed, hardly screwed, or not really that screwed at all.
The job of the Federal Reserve Bank appears to be to create money where none existed before (fractional reserve banking), and then to sell the money, which is in turn sold at incrementally higher interest rates to private banks and eventually to average borrowers including individuals and businesses. As far as I can tell, our current problem stems from the continued creation of debt, at profit, until the debt-to-real assets ratio just got so high that our system of fractional reserve banking is stretched too thin to function. Yikes. For more on this, listen to this really excellent NPR interview with Michael Greenberger who attempts to quantify the scale of the credit-default-swap problem.
Responses to this our current massive debt issue range from the fascinating Austrian School of economics, and to a lesser degree the Chicago School, which advocate a do-nothing and let the super ultra laissez-faire approach rebalance the system, to our more commonly accepted Keynesian approach which advocates government intervention, one would presume in the form of throwing more money on the problem with big stimulus packages, but not too big depending on whether you ask a Republican or a Democrat.
Interestingly, a similar problem on a smaller scale occurred in Sweden in the 1990s and was resolved with a combination of bank nationalization and separating bad assets into separate “bad banks.”
My take-away was this:
If we manage to keep our current economic system afloat (my bet is we will), we need immediate legislation that requires standard reporting and complete transparency for all forms of complex derivatives. Greenberger’s estimate (which we currently have NO WAY of verifying or denying) is that this form of “shadow finance” is valued at roughly $62 TRILLION, more than all stocks, bonds, and securities combined.
Pass more tax cuts like the one proposed by Barbara Boxer as incentive to spending, don’t just throw money at the problem.
Institute a conflict-of-interest policy that bars people like Henry Paulson (see previous post) and Phil Gramm from crossing over from the private sector into a government role, and from holding board positions while occupying any public seat of office.
If it gets any uglier, buy gold. Traditional money is just paper. Or follow Rushkoff’s advice and create your own currency like the Liberty Dollar.
Read The Road by Cormac McCarthy for preparation in the event of world-wide system collapse. Or better yet, don’t!
The Stimulus Package: The Devil’s In the Details
The stimulus package is so big and so daunting that it’s hard to get your head around whether it will ultimately do anyone any good. Republican senators have held the bill up in an attempt to remove wasteful unnecessary spending. My first thought was, Of course it’s wasteful unnecessary spending! It’s a pile of handout money for lord’s sake! But then I thought I’d take a look at the criteria for determining waste versus legitimate spending.
This list from CNN enumerates the items to which Republican senators object:
• $2 billion earmark to re-start FutureGen, a near-zero emissions coal power plant in Illinois that the Department of Energy defunded last year because it said the project was inefficient.
• A $246 million tax break for Hollywood movie producers to buy motion picture film.
• $650 million for the digital television converter box coupon program.
• $88 million for the Coast Guard to design a new polar icebreaker (arctic ship).
• $448 million for constructing the Department of Homeland Security headquarters.
• $248 million for furniture at the new Homeland Security headquarters.
• $600 million to buy hybrid vehicles for federal employees.
• $400 million for the Centers for Disease Control to screen and prevent STD’s.
• $1.4 billion for rural waste disposal programs.
• $125 million for the Washington sewer system.
• $150 million for Smithsonian museum facilities.
• $1 billion for the 2010 Census, which has a projected cost overrun of $3 billion.
• $75 million for “smoking cessation activities.”
• $200 million for public computer centers at community colleges.
• $75 million for salaries of employees at the FBI.
• $25 million for tribal alcohol and substance abuse reduction.
• $500 million for flood reduction projects on the Mississippi River.
• $10 million to inspect canals in urban areas.
• $6 billion to turn federal buildings into “green” buildings.
• $500 million for state and local fire stations.
• $650 million for wildland fire management on forest service lands.
• $1.2 billion for “youth activities,” including youth summer job programs.
• $88 million for renovating the headquarters of the Public Health Service.
• $412 million for CDC buildings and property.
• $500 million for building and repairing National Institutes of Health facilities in Bethesda, Maryland.
• $160 million for “paid volunteers” at the Corporation for National and Community Service.
• $5.5 million for “energy efficiency initiatives” at the Department of Veterans Affairs National Cemetery Administration.
• $850 million for Amtrak.
• $100 million for reducing the hazard of lead-based paint.
• $75 million to construct a “security training” facility for State Department Security officers when they can be trained at existing facilities of other agencies.
• $110 million to the Farm Service Agency to upgrade computer systems.
• $200 million in funding for the lease of alternative energy vehicles for use on military installations
Agreed, much of this could be considered straight pork, but some of these look like job-creating, necessary projects. Anything involving sewage or waste-removal for example, or improving transportation. But $10 million to inspect canals? $400 million to screen for STDs? Nah, not a good use of public funds. When it comes down to it, though I wish we had more, I am happy to see the two parties keeping each other in check.
The Margin of Error for Obama Appointees
Goodbye Daschle, and your little red glasses, too! Apparently, his error was too big to pass muster. Do we need to find appointees who are absolutely perfect? It’s a tough balance when government is in need of some serious ethics. While I agree that Daschle’s case was fairly serious ($128,203 in back taxes and $11,964 in interest), it’s hard to lose these people who probably would’ve been effective at their jobs. New Mexico governor Richardson has had some possibly shady dealings with contractors who were also political donors. Geithner made it to confirmation despite having paid late income taxes (approximately $34,000).
Sadly, you can also say goodbye to Chief Performance Officer appointee Nancy Killefer. Killefer withdrew herself from the appointment with an acknowledgment that she’d also made a less than a thousand dollar error ($298 in unpaid taxes, $48.69 in interest, and $600 in penalties) on her DC employment taxes. She failed to pay employment taxes for a year and a half for household employees.
Do women hold themselves to a higher standard than men? Maybe. Or Killefer may have had more to hide. While I’m ecstatic about the positions of Pelosi, Clinton, Boxer, and Feinstein, I’d love to see more women appointees and hope more women have the stomach to stay in the fight. Wouldn’t it be great to have more women on the Supreme Court?
Serious Discussion About Stimulus Strategy
Pro-stimulus? Anti-stimulus? It’s hard to know whether government’s attempts will prove effective. Wondering what the right approach should be? Watch and learn:
In The Know: Should The Government Stop Dumping Money Into A Giant Hole?
I think I’ve seen this on the news about fifteen times in the last couple of weeks!
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