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182 comments on Peak Oil and Economic Growth: Where Do We Go From Here?
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182 comments on Peak Oil and Economic Growth: Where Do We Go From Here?
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I can suggest one reason why economic growth has been a public policy imperative: greed! People, especially those already at the top, tend to have an insatiable thirst for money and power. Economic growth allows the "haves" to pursue the extremes of wealth and power without it being a politically explosive issue with the masses. In a steady state economy, growth in wealth of one individual has to come at the expense of someone else. So, a small elite amassing great fortunes would have to come at the price of impoverishing great swaths of society. With the continuous growth paradigm, however, it is possible to at least placate the masses with the belief that they too, someday, can join the privileged ranks of the wealthy.
In my opinion, continuous economic expansion is a necessary condition to allow the rich to amass even greater fortunes without political blow-back!
unless the 'rich' see that:
a)conspicuous consumption doesn't make them happy
b)other things do make them happy
c)conspicuous consumption among the rich makes poorer people ornery, and a little on the violent side
d)the economic system evolves in such a way that you can't spend your wealth on things of power/novelty that you used to be able to.
The bigger problem with the steady state economy (and my idea of changing the cultural carrot) isn't persuading people that these ideas are 'true', but that there is such momentum to the current system that theres no easy bridge to get to a Steady State Economy. We just need to use our remaining fossil fuels to build more local regional infrastructure as best we can and simultaneously demonstrate that more doesnt necessarily mean better - hopefully that awareness will snowball into a viable path.
Recently I've been blogging about a framework for transitioning from our current growth-oriented economic system to a steady-state economy in balance with the ecos. The entry point to this transition is to first make money a meaningful measure of economic activity. That involves developing a currency standard based on free energy. Money represents an amount of free energy (available to do useful work) and the amount of money in circulation should represent the total amount of free energy extant at any point in time.
The point of an energy standard is that it pegs the value of a currency directly to what it actually is supposed to represent, the ability to do work in the future. The valuation of wealth can then be done with a measure such as emergy, representing past energy expenditures on useful goods and services.
It is vitally important that we know what things cost in energy terms so that we can budget appropriately. This will become absolutely necessary in an era of shrinking net free energy.
The blogs are available at: http://questioneverything.typepad.com/
You might want to go back to the March 14th entry, "What's wrong with this picture?", for some background and introduction. But the March 25 entry, "What is money - really?", conveys the basic idea. I will be continuing this series (with minor diversions) by looking at other economic phenomena such as financing and profit making, etc. in future blogs. Then I will begin looking at possible implementation scenarios.
The main point is that if we are to achieve a realistic steady-state economy at some nominal population size and per capita consumption rate, then we need to be in a position to measure accurately and concisely the true costs of work and products/services to judge their worth.
George
http://faculty.washington.edu/gmobus/
I am reminded of the Pacific Northwest Indian pot-latch tradition. Status was not what you owned but what you gave away. Very interesting tradition. Leadership was directly connected to generosity.
Even with the potlatch tradition someone somewhere had to produce what was given away.
True. But the tradition ensured that leaders were accumulating social wealth, not resource wealth. The fascinating thing was that the participants were producing surplus solely to re-distribute it.
This is fundamentally different from our model where surplus is converted to markers and then hoarded. Well... "invested" is the polite word.
You'd think that in a steady state economy there would be no such thing as surplus.
Plenty of surplus if one has far less people than what the local biosphere can provide.
That's fine if the things you give away were produced by you but perhaps the chiefs gained their status by giving away things that they appropriated from others.
perhaps the chiefs gained their status by giving away things that they appropriated from others.
Seeing as how you don't provide a link, I'd have to call that statement one of casting aspersions.
Here's
a google return with a snip about
revival from one of those returns:
I'd just guess that there wasn't much "appropriated from others", if any.
Except that, for the elite, it's not about happiness. It's about power and winning. And power, much more than mere happiness, really matters.
Happiness is nice but it's a side dish, irrelevant to many for whom it actually gets in the way and slows them down.
Except that, for the elite, it's not about happiness. It's about power and winning.
It's also just plain about the money. There was a quote floating around some years ago from a Dutch economist who'd stated at some big conference: "It may not be profitable to slow decline." That's the kind of insanity behind the growth paradigm. And the more I think about all this the more I am convinced the rich/elite are just plain bonkers... once upon a time, the overlords accumulated wealth as a means of consolidating power. Now they accumulate power for the sake of consolidating not wealth, but fiat currency notes — which they themselves have designed to be ultimately worthless — represented in binary code that is irretrievable without electricity. It is as if currency notes have replaced the sun as humanity's primary focus of worship and sacrifice.
Very thought provoking post! The idea that comes to mind with a "steady state economy" is not that the current system will evolve into a more humanistic system but that the system will devolve into Mercantilism.
"Mercantilism suggests that the ruling government should advance these goals by playing a protectionist role in the economy, by encouraging exports and discouraging imports, especially through the use of tariffs."
Conspicuous consumption may go out of fashion but old habits die hard. People will hoard wealth and resources and we will be looking at somewhat of a zero sum economy. In such an economic environment there will be winners and losers (just as now) but the difference is the losers will be hurting a lot more and over time will be unable to compete.
In America we have been sold the idea that "low taxes are good", "high taxes are bad". Our current tax structure is rigged for the wealthy and is punitive to those that are less wealthy, but any attempt to dismantle that system will be met with stiff (perhaps violent) resistance.
A lot of people are Utopian in outlook (I certainly fit in that group) but when you try and sell that idea to people who fear that they might be a "loser" in that new system, any further proposals to solve the "general problem" will fall on deaf ears.
I think that over time civilization will establish new systems that will be far more egalitarian and capitilism just as totalitarianism will fail, but these systems will initially take hold in small communal ventures (as they are already) but society at large will not reform.
Our current economic system will have to either collapse or be overthrown (violently).
"In a steady state economy, growth in wealth of one individual has to come at the expense of someone else."
That is true for all economies, steady state, expanding or contracting. Ignoring inherited gains and lottery wins, all individual gains in wealth come at the expense of others - the only issue is whether it is a small number of others or the collective commons.
If an individual stumbles upon a mountain of pure gold, or an ocean of oil, or a billion dollar gift from the (privately owned and money-issued-with-interest) Federal Reserve - then the wealth derives from the adverse impact imparted on the market (collective commons).
The highly trained professional (say a surgeon) derives increased wealth from others because society believes that their time is more valuable - using professional sports people as an allegory; if one swings a stick at a ball often enough, then one will inevitably get good at it. Does anyone truly believe that professional sports people and other entertainment people are really worth the millions they "earn", and don't get me started on "executives" at (for example) Bear Stearns, Carlyle Capital, Enron, US West, all the ratings agencies, the SEC, the FSA (in the UK), the actuaries and executives at the companies insuring the CDO's and on and on and on. They have bilked millions (literally) from the collective commons for far to long.
For people not to know the truth about entities like JP Morgan, the Federal Reserve System (sic), et al - is a VERY sad indictment of the USA.
Of course, it is possible to become wealthy without "bilking" the rest of society. Most normal (not athletes or CEO's) people you would consider wealthy followed a time tested formula. Simply consume less than you earn year after year, and over the course of a career, it's actually quite simple to amass wealth. What's evil about that? I'm only 26, so I have not had time to save enough to be considered wealthy, but I have saved quite a bit more than probably 95% of the people my age. I live off of roughly 40% of my income, and save/invest the rest. Who exactly am I bilking this wealth from? Why should I feel guilty if in 20 years I have accumulated more wealth than my peers who blew all of their money on mindless consumerism. How does my thrift impoverish "great swaths of society". There are always exceptions, but by and large, the wealthy got that way by consistantly making good financial decisions and the poor are poor because they consistantly make bad financial decisions. In my opinion most of the rage against the wealthy is misplaced.
If you "invest" your savings then in the long run most of your "wealth" will come from the investment gains rather than the actual savings. That's where the "bilking" is.
Alas, our current money system only allows us to save for our old age (or a rainy day) via the same system of usury. The only way to opt out is to for our earnings to be, right from the start, in an alternative currency.
"If you "invest" your savings then in the long run most of your "wealth" will come from the investment gains rather than the actual savings. That's where the "bilking" is."
Yeah, it really sucks when everybody wins.
Everybody loses, since this is what's driving "growth", i.e. unsustainable drawdown of natural resources, and that'll result in collapse and die-off.
Eventually sure.
If its after we consume the resources of the entire galaxy, who cares?
Well, that's the sort of dim-witted comment you became famous for on peakoil.com. Still the universe-raping, nuke-pushing cornucopian, I see.
You could also invest in a business... in traditional Judaism and in modern Islam, nobody gets interest on loans, they just invest in your business with you and share the profits for a while until you buy out their shares.
Modern Islamic banks still do this. The Gulf isn't prosperous just because of oil money, you know. That's most of it, but their banking system helps.
Being able to live off of 40% of your income might be seen in some quarters as being paid too much to begin with. There are many who loose livelyhoods because they are marginalized by corporate greed. Out-sourcing. The biggest problem in society was allowing corporations to be treated in law as citizens.
The reason corporations behave the way they do is because they are required to do what's best for the shareholders, i.e., what brings them the most (unearned) returns. Thus the "growth" imperative.
Your ability to save is admirable. Please tell me that your savings are not based in US Dollars. Please tell me that your interest rate is above the true rate of inflation, that being the one that takes into account essentials like the cost of food and fuel. And while you are at it, please tell me you are not an extreme exception.
What do you mean by "most normal people you would consider wealthy"? As far as I'm concerned the vast majority of people are normal and they are far from wealthy! The average American is looking at 30% interest on their credit card bills - and the Investment Banks are getting loans from the Federal Reserve at less than 5%. Can you truly, hand on heart, tell any of us that this is equitable?
Do you think it is acceptable that Americans can buy Japanese cars with loans at 0% interest, but these same rates are not available to people in Japan (go read up on the carry trade).
I am not saying that working to become wealthy is immoral, I am saying that whichever way you look at it, someone else is losing something somewhere in order for you to be wealthy.
"There are always exceptions, but by and large, the wealthy got that way by consistently making good financial decisions and the poor are poor because they consistently make bad financial decisions." - this is ad hominem but you are naive.
I distinctly remember in college, my wife and I had an annual budget of $14,400, or 1200 a month, roughly equal to our combined part time incomes. That covered rent, insurance, utilities, food, and if we were lucky, one or two "dates" a month. It wasn't much, but I never remember feeling deprived.... it was actually a pretty good life. After graduation, our incomes grew a lot, but we had no desire to increase our standard of living by the same amount. It's that simple. We may be an extreme exception... but not because what we are doing is difficult.
As for credit card debt.... these are the "consistantly bad decisions" I refer to. People who hold credit card debt made that choice by their own free will. Most will claim they had no choice... but they often neglect the years of cumulative bad decisions that led them to be "forced" to rely on credit cards. Usually, they bought a house they couldn't afford, an SUV that burns hundreds of dollars a month, and dined out more often than cooking at home. When a crisis hit, they simply lacked the liquidity to cope, and the house of cards came crashing down. In short,they failed to keep expenses below income.
Dear Mr. Moneyman,
I think you have to be in your twenties to believe that the system is so fair.
What happens when the savings that you sock away becomes worthless through hyperinflation or Wall Street pirates?
What happens when the blue chip company that has your pension invested goes belly up and hides assets then goes bankrupt?
There are so many ways to lose...With oil production peaking there will be massive amounts of wealth that will literally evaporate.
The late great Joseph Campbell said the following about money: "Follow your bliss. If you find money so much the better. If you chase the money, chances are you may lose the money...and then you'll have nothing."
It's more than simple greed.
What it comes down to is that people will accept a big rich-poor gap if there's some social mobility, if there's some hope that the poor can become rich.
In imperial China they had the imperial civil service examinations, where any sufficiently educated person, regardless of background, could join the civil service and build a good life for themselves. This affected very few people, really, but it gave everyone hope. So they put up with a large rich-poor gap.
And in fact people have studied this, and found that around 1800 the exams became corrupted, fewer people were passing them and those who did pass were nephews of current officials, and so on. There was then less social mobility. It's no coincidence that China later had the Taiping Rebellion, until WWII the bloodiest war in human history. And in the words of the Taiping we hear the kernel of what would later become Chinese communism: they shared everything equally, men and women were equal, and the Taiping leader had a harem...
Societies which don't allow for social mobility get rebellions and revolutions. The genius of capitalism is that if offers this social mobility: not everyone can be rich, but anyone can be rich.
However, if the amount of wealth stays steady, then for some poor to become rich means some rich must become poor, it becomes a bit of a shell game. And so we seek economic growth. If the economy is growing, then not just anyone can be rich, but everyone, right? After all, the economy has quadrupled in real terms since 1960 and we have only one-fourth as many poor people, right? Er...
People will put up with great misery so long as there's hope of things improving. Economic growth offers that. Think of the poor of the West. Think of the people living in trailer parks, the homeless, the working poor, the welfare mothers, the young man just out of prison desperately looking for a job... now imagine telling them: "Sorry, this is as good as it gets - there's no hope of change."
Or if you do want the economy to just stay steady, but at the same time raise the condition of the poor, well then where does the money come from? The rich. "Look dear CEO, having 100 times the salary of a worker in your company is a bit much, let's drop it to 50 times and with your taxes we can support 100 poor people fairly well." I suspect the donations to the party would not be so generous that year...
It's a difficult thing. The genius of the capitalist system, that in its heart lies the promise of social mobility, that only works in a constantly growing economy. Take that away and... You may not get a bloody rebellion, but you certainly won't be re-elected.
Gowths' imperative is debt based leveraged banking, or the misnamed "fractional reserve banking".
Why is growth an imperative; without it the money supply shrinks then spirals downward. In our system all money is created by debt. The government gives banks the right to loan money at interest at a ratio of 10 to 1 to deposits or better. When you take out a loan they place money in your acccount and you pay for the article you purchased, money is created in the system. This a great deal for banks as $1 in deposits can fetch interest on $10 worth of loans.
The problem arises that more debt must be created every year to pay the interest, because the interest debt is not backed by money creation as was the loan. So there is a geometric progression of the need of further loans to create enough money to pay the principle and the interest. Without this geometric progresssion the money supply stagnates, leaving the system short of money to pay both the principle and the interest.
Money stagnation creates huge problems for the economy and the government. The economy winds down reducing profits and wages thereby reducing the taxable income. This is why the mantra is growth from both government and industry, they need the ever increasing suppply of money to run the system. That puts the bankers in charge as they control the spigot of credit that creates the money.
Is there a solution? Yes, Government created non interest bearing debt in the form of credit and money. Certainly, the money creation must be monitored closely so that there is enough to run the economy without increasing inflation. In this way government can fund its' operations much more cheaply and efficiently and break the dependence on unsustainable geometric resource depletion to underwrite ever more more "growth".