Posts Tagged ‘Post-crash economics’

Post-crash economics

December 4, 2014
Eco-Economics

Eco-Economics

Science advances one funeral at a time. — Max Planck

Somehow, we have come to think the whole purpose of the economy is to grow, yet growth is not a goal or purpose. The pursuit of endless growth is suicidal. — David Suzuki

Imagine being taught astronomy and being taught the earth is at the centre of the solar system.

Imagine being taught geology and being taught the earth was flat.

Imagine being taught evolution and being taught all living creatures were created at once.

Imagine being taught economics and being taught free markets and capitalism give rise to efficient distribution of resources.

Imagine being taught economics and being taught the market operates on the basis of rational human behaviour.

Imagine being taught economics and being taught that you can have not only linear growth but exponential growth within a finite system.

Economists did not not predict the crash. A few outside the mainstream did, but they are regarded as mavericks.

The economic dogma being taught at so-called top universities bears absolutely no relationship to the reality of the world outside. One of the worst is Manchester. Manchester economics students when asked, could not answer simply economic questions. They would probably have a better grasp of economics if they attended an Occupy briefing.

When was The Wealth of Nations published?

If the unfettered market, capitalism worked, why were the banks bailed out, why were three major US car companies bailed out?

The existing economic system is broke:

  • massive transfer of wealth from the rich to the poor
  • tax dodging by the rich and global corporations
  • abject poverty and appalling working conditions
  • soul destroying, temporary, part time, de-skilled, zero hours McJobs
  • global corporations granted free reign to rape and pillage
  • war zones where concerned citizens and rapacious corporations are in conflict
  • mass collapse of the number of species
  • climate chaos
  • trashed planet

Those who say it is not, who continue to teach an economic dogma that is clearly false, are protecting the status quo and their own status, reputations tied to a false dogma. They would rather defend a broken system, than address the real issues outside.

When two people meet, a price is agreed, and an exchange takes place, an economic transaction has taken place, both parties are happy. What we cannot do is aggregate all such transactions, call it GDP (Gross Domestic Produce), then use it as some sort of measure of the well-being of a nation, as it is not. If we think it is, all our polices are geared to increasing GDP, rather than looking at real issues that matter.

The massive flood damage that occurred in England winter 2013-2014 incurs a cost to put right the damage. That cost will be reflected in an increase in GDP, less whatever economic activity was lost, but no one would suggest this was a welcome increase in GDP.

But no matter what we do to increase GDP, those attempts to increase GDP have failed.

Austerity has failed, it has simply been used as an excuse for Shock Doctrine, slash and burn of public services.

Greece has seen its economy shrink by 25%.

Quantitative Easing has failed, other than to put money in the pockets of the rich and to inflate the bonuses of bankers.

We have enclosed the commons. Enclosure being when we steal that which formerly belonged to everyone or no one and sell it back to those who once had it for free.

We have enclosed the social commons, the intellectual commons, the spiritual commons, there is nothing left to enclose.

A generation or so ago, childcare was an informal affair, people helped each other. Now people complain they cannot afford childcare.

Childhood has been stolen from children, then sold back to them as computer games, Disney entertainment. Where once children had their imagination, now video games play out their fantasies for them, their adventures are mapped out for them through TV.

People would hear a song, sing along, change it, add new lyrics, now someone owns it.

Copyright kills creativity.

Annette Hanshaw was a well known jazz singer in the 1920s. Now she is unknown. Global corporations own the copyright. No money to be made releasing, and so she remains unknown.

We grew our own food in our back garden, or on our allotment, prepared it, cooked it, served it. Now we buy it shrink-wrapped from the supermarket, ready made, pop it in the microwave, or if that requires too much skill, we visit a restaurant.

People made their own clothes, knitted their own cardigans and jumpers, baked their own cakes.

Once we lose these skills, we never get them back, we do not pass them on, then we have to go out to work, to get the money to pay for the goods and services we were once able to make and do and perform ourselves.

There is a limit to what we can enclose, what we can steal that was once free and sell back. Once we hit that limit, we reach the end of growth.

A factory can slowly slowly increase the productivity of its workers, such that in ten year’s time output per worker has doubled. What then?

  • double the market
  • halve the number of workers

Workers have been increasing their productivity but they have not seen that matched by a pro rata increase in wages. Their surplus has been syphoned off by those who own and control the means of production. This flat-lining of wages was long before recession hit. Now wages have flat-lined for a different reason, productivity has declined, not because the workers are not capable of producing more or are lazy, there is no market for their goods, so less is produced. We either sack workers or keep them on at low wages or on reduced hours.

We saw a brief boom in the financial sector, wizards making money out of nothing, complex financial instruments that no one understood, but who cared, we were making money. Except that were little more than Ponzi get rich quick scams.

Like the mythical creature who consumes everything around him, when nothing left, starts to eat himself. Having enclosed everything there was to enclose, the financial sector engaged in auto-cannibalism.

To gain a competitive advantage, companies innovate, this may mean offering more features we do not want, think smart phone, or dropping the price. As the price falls, less money is made.

Where once local papers sold, through small ads, wanted, cars, houses are sold on the internet. The value of the market created is a fraction of that lost.

Why use a travel agent and tour company when you can go on-line, book a hotel, book a flight? Again the value of the new market is a fraction of the market it destroyed.

The cost of things is tending to zero.

Marginal cost of an e-book or digital music is zero.

If I go to a bank and ask for a million dollars, I will be asked what do I want it for? If I say to buy a wood, to stop it being developed. I will be shown the door. If I say I will clear fell it, sell off the wood, develop the land for housing, the bank will fall over backwards to give me the money.

We employ people at low salary, the government steps in and makes up their wages. In essence, subsidising bad employers. Set a higher minimum wage, many of the Mcjobs will vanish overnight, the companies will go bust, no more junk food outlets, no more processed food factories. Quality fresh food will be able to compete, we may learn, or re-learn old skills, our diet will improve, we will be healthier, health care costs will go down.

Cheap food is only cheap because we externalise the costs.

Cheap clothes are only cheap because we externalise the costs in human misery.

Focus tends to be on public debt.

It is dwarfed by private debt, ie that held by individuals.

It is dwarfed by corporate debt.

The level of debt is unsustainable.

We have an economy that has become dependent upon zombie consumers and private debt, must have latest stuff, must have latest stuff. Fuelled by advertising

The fastest growing sector of the economy is the collaborate commons, sharing, the gift economy. It does not factor into GDP because no money changes hands.

We need different economic measures:

  • circulation of money in the local economy
  • vitality of local business
  • ratio of local shops to High Street chains
  • dirty energy to produce a good or service
  • environmental impact to produce a good or service
  • human labour required to produce a good or service

We often hear of sustainable development, what do we mean by sustainable? We certainly do not wish to sustain the existing system, broke beyond repair.