Heinberg: growth will end.period.

Economic growth as we have known it is over and done with; only relative growth is possible. The world economy is now a zero-sum game, with a shrinking pie to be divided. According to Richard Heinberg in End of Growth, Adapting to Our New Economic Reality, the three factors that stand firmly in the way of further economic growth are: resource depletion (oil, minerals, fresh water), negative environmental impacts (climate change, pollution, loss of biodiversity), and financial collapse (debt crisis).

The language is vivid and clear, the argumentation is solid. Heinberg clearly has both broad and deep knowledge about many important parts of the marvelous creation that we call society, and why growth will end.


The industrial revolution was really a fossil fuel revolution. Petroleum plays as big role in this book as it does in modern society. “Energy is not just a commodity; it is the prerequisite for any and all activity. No energy, no economy,” says Heinberg, an American journalist and the author of ten books. He serves as a Senior Fellow at the Post Carbon Institute and was one of the first to bring up the huge impact peak oil would have on modern society.

Not only are fossil fuels depleted but also fresh water is being critically overused and degraded. In the US, many mineral resources, including bauxite, copper, iron ore, magnesium, phosphate rock, potash, and zinc, are well past their peak rates of production.

The central discussion in End of Growth, however, is the financial collapse of 2008, and the following global crisis including the Euro crisis, Heinberg says “marks a permanent, fundamental break from past decades.” He says that “the entire economic system had come to depend on impossible-to-realize expectations of perpetual growth and was set to detonate.” Money was tied to banks making money when issuing loans and credit was tied to assumptions about growth. When growth stalled in 2008, there was a chain reaction of defaults and bankruptcy.

I find it very hard to know if the financial turmoil of today is really a fundamental break or just one of many stations on the path of a train downhill. Viewed in the longer perspective, I have no doubt that Heinberg’s link between the economy and resource depletion is real. Whether contraction is chaotic or controlled, and whether it comes sooner or later, a radical simplification of the economy is more or less inevitable, as systems designed for cheap energy and resource depletion reach environmental limits.

When energy declines, the trend toward specialization will be reversed and so will urbanization. Urbanization depends on surplus agricultural production from agriculture, which in turn depends on cheap oil. Whether we like or hate globalization and specialization, we will rely more on local resources and production capacity. “How far we will go towards being local generalists depends on how we handle the energy transition of the 21st century,” says Heinberg.

Heinberg certainly doesn’t sugarcoat his messages. It is possible to have a civilization without fossil fuels, but this civilization will be different than ours. How far will we have to retreat? Can we surrender cars, highways, and supermarkets, but still keep cultural exchange, tolerance, and diversity, healthcare, and instant access to information?, he wonders.

End of Growth is not a comforting book to read, and it shouldn't. “I may seem to have gone out of my way to focus relentlessly on negative prospects, discounting possibilities and opportunities while highlighting limits and dire outcomes,” writes Heinberg and explains that because the end of growth is an unattractive notion most people are likely to avoid considering it.

Heinberg identifies, like many others, that the problems of dwindling resources and environmental destruction are compounded by population growth. Any gains from increased efficiency of resource use are erased by growing populations.

One aspect of demography missing in this otherwise excellent book is that of demographic changes themselves causing growth to shrink or even cease altogether. The importance of population growth for our unprecedented economic growth is underrated. There is a very strong correlation between the phases of the so-called demographic transition and economic growth. Countries that undergo the transition will have a once-in-the-lifetime-of-their-civilization window of opportunity, when workers are many, the number of children has gone down and the number of elderly is still small.

In the same way, once the cohorts of working shrink and population ages, growth will inevitably slow down. Heinberg notes this about China, “Beginning in 2015, China will see a growing number of older citizens relying on a shrinking pool of young workers.” However, this is not unique for China. Japan and most of Europe has already undergone this transition, which is a major reason why their economies hardly grow anymore. Apart for the resource scarcity, environmental problems and financial melt-down, I venture that we also reach Peak Work. In the United States, 67 percent of the people in working age were engaged in the labour force in 1998, up from around 50 percent in the 1950s; this has now dropped to almost 63 percent and the numbers are still falling

The list of critical problems facing civilisation is nearly endless, but for each problem there is a solution. But if there are so many solutions are available, why does the scenario for the future look so dreary? asks Heinberg and explains that most people assume that solving a problem means being able to continue doing what we are doing now. “Yet it is what we are doing now that is creating our problems.”

The mere idea that all challenges are problems to be fixed is perhaps “part of the problem”. John Michael Greer talks about the difference between a problem and a predicament. A problem calls for a solution; a predicament, by contrast, has no solution. Faced with a predicament, people come up with responses. Those responses may succeed, they may fail, or they may fall somewhere in between, but none of them will “solve” the predicament, in the sense that none of them can make it go away.

It seems to me that it is hard to discern what is needed to save the economy from imploding with a big bang – something that will cause enormous suffering and social strife – and what is needed to induce a smooth transition. This is, of course, extremely difficult to know when you are in the middle of it. One thing seems clear – that it can hardly be more of the same that will get us out of the mess.

Heinberg also sees a conflict between the survival strategies of individuals and what is good for society at large, at least in the short-term. Individuals should be disengaging from consumerism, getting out of debt, becoming more self-sufficient. But if everyone did this, it would keep the economy from recovering and would push us further into recession.

Heinberg points to local currencies, Transition towns and cooperatives as useful tools. He also floats the idea of locally-based Community Economic Laboratories established in the center of towns. But he also notes that “there is no hope in hell that Transition initiatives, co-ops, and alternative currencies will spring up fast enough and on a sufficient scale to avert general economic misery.” Heinberg banks on our abilities as social beings; he believes our most valuable assets will be local communities composed of people who are willing and able to work together. To maintain the social cohesion must be our single highest priority.

Heinberg has changed the discourse from discussing why growth should end to that growth will end. Period.


Read more: Richard Heinbers's web site
Other endorsments
"Heinberg shows how peak oil, peak water, peak food, etc. lead not only to the end of growth, and also to the beginning of a new era of progress without growth.”
–Herman E. Daly, Professor Emeritus at School of Public Policy, University of Maryland and author of Beyond Growth

“Dig into this book! It is crammed full of ideas, information and perspective on where our troubled world is headed – a Baedeker for the perplexed, and that’s most of us.”
–James Gustave Speth, author, The Bridge at the Edge of the World: Capitalism, the Environment and Crossing from Crisis to Sustainability
More endorsements for ‘The End of Growth’

Ebook
I used  End of Growth as a test case for reading an e-book. I liked the book a lot more than I liked reading on the PC-kindle! Admittedly the Kindle was great for copying text and for highlights, but somehow I don't get the same overview when reading on the e-book.  Perhaps it will come with practice.

Growth is gone - welcome steady-state

Perhaps we should stop discussing whether growth is good or bad and just conclude that it is ending...
Clearly, growth has stalled the last decade. Of course, some still put their faith into that growth will restart again, and they have all kinds of ideas what societies should do to re-start growth. Many, including myself, question the growth paradigm itself. Well, perhaps we don't have to discuss it anymore - growth is declining.



This is particularly apparent if we look at GDP per capita which adjust for population growth. In most rich countries the number of people working in the economy is declining and with them economic growth - Macrofugue Analytics talks about Peak Capitalism. In most parts of the world, we have reached Peak Child. For a while those countries, such as China will go through a period of growth stronger than ever before and ever after, but gradually growth will subside. While we will not run out of fossil fuels, there is no doubt that new sources are much more expensive to extract and has lower EROEI than earlier finds and therefore contributes less to growth. 

It seems to me that young people in Europe or North America today can not assume - as my generation did - that things will be better and better. And this is even without the drama of climate change taken into account. Youth unemployment in Spain has reached 56 percent these days.

So, instead of arguing if growth is good or not, perhaps we should instead discuss how we will manage a society without growth. Also those that are in principle in favour of continued growth might find it wise as a safeguard - a contingency planning.

It seems to me that we need to re-think a lot in our societies if growth is not there. One apparent thing is of course pensions. We can already see a pension squeeze in many countries. Intra-generational conflicts might increase when the cake is not constantly growing. Many business models are built on assumptions of growth and many peoples' housing "careers" are built on ideas of ever increasing house prices - assumptions that already have proven wrong and dangerous. 

As a matter of fact it might be the case that our entire system requires growth. But then we would have to revisit the system rather than desperately trying to incite new growth, with higher and higher social costs.

The religious belief in constant progress needs to be revisited.


read also:
Lagom is good enough
We get richer also without growth
Aging populations will end growth
Japan: post growth and post-peak-oil works?

 

 

Lagom is good enough

Lagom, a Swedish word, is perhaps a key concept for a really sustainable society.  According to popular but contested folk etymology, it is a contraction of "laget om" ("around the team"), a phrase used in Viking times to specify how much mead one should drink from the horn as it was passed around so that everyone received a fair share. The closest you could come in English would be: “just right”.

Rob Dietz and Dan O'Neill authors of Enough is Enough, take on the task of how to build a sustainable economy in a world of finite resources. They say, ”Perhaps the most important number is one - one single blue green planet with finite resources that we all must share”

The book is well written and the arguments are convincing. Apart from all the facts in the book, each chapter has an introductory story with a nice personal touch. Contrary to most books in the genre, Dietz and O'Neill spend more pages explaining how a no-growth economy would look like rather than why perpetual growth is neither possible nor desirable. They do both jobs well.

Both authors are affiliated with the Center for Advancement of the Steady State Economy (CASSE). And “steady-state-economy” is the term the center use to describe a no-growth economy. They do ask their readers to come up with a more catchy and sexy term. However, trying to change the world is very different from selling soap, and I believe we underestimate people when we assume that we have to “sell” them a catchy phrase.

In the first part of the book, Dietz and O'Neill debunk the ideas of “decoupling” and “trickle-down economics”. They do that well by providing a number of facts. For example, for every $100 of economic growth, only 60 cents reach the billion poor in the world. This is based on a report from the New Economic Foundation, available here. Clearly this is a decidedly inefficient way of distributing wealth. As they state: “someone is profiting from economic growth, but it is not the world's poor.”

There are a number of interesting observations or ideas discussed in the book. For example:

·      Just as several aspects of our current society have all reinforced each other—for example, population growth, competition, cheap oil and technology; crisis situations also have such self-reinforcing sides. The authors point out that we should expect such cascading effects in the process of building a steady-state economy as well.

·      The best ways to achieve well-being are those that take time, consume none or few resources, and are for free.

·      The “purpose” of the financial sector is to facilitate and intermediate between business and investment, and the costs for this is a burden to the rest of the economy. The fact that the financial sector takes an ever increasing share of the economic growth is not a sign of health or of any improvements in our livelihoods.

In parts two and three of the book, Dietz and O'Neill outline the strategies of reaching a steady state economy (part two) and the actions to be taken (part three). Both parts of the book are very interesting. One can also see that here the authors, self admittedly, are in unchartered territory. This is reflected in some redundancy and a vague division between parts two and three.

They call for changes on a number of strategically selected institutions in our economy and attitudes in our society. In their opinion, investments should generate social and environmental returns instead of financial returns; labor productivity can be perused to reduce and minimize unpleasant work, but not to take away jobs that bring joy and meaning; new forms of ownership (e.g. social enterprises) need to be developed and some existing forms (e.g. cooperatives) need to be revitalized instead of us being stuck in the choice between private and public; and finally we need to rethink our relationship to nature. They refer to these four thoughts as the “foundation” of a steady growth economy.

In their opinion, ten pillars of “policy directions” are needed. They include:

1.     Limit resource use and waste production

2.     Stabilize population

3.     Distribute income and wealth equitably

4.     Reform monetary and financial systems

5.     Change the way we measure progress (goodbye GDP)

6.     Secure full employment (by job-sharing and guaranteed jobs)

7.     Rethink how businesses create value

8.     Replace the culture of consumerism with a culture of sustainability

9.     Stimulate political debate about limits to growth

10.  Change national goals regarding growth and improve international cooperation

With these “pillars” in place, we can move towards a society that is sustainable and equitable and where human well-being is the centerpiece of life. Dietz and O'Neill present an appealing vision of how such a transformed society could look like.

Such a transition will require changes in institutions, laws, constitutions, attitudes and distribution of wealth. I find that the book mixes “hard” and “soft” factors (see the list above) in a not so clear way. In fact, for the soft factors there is often no path on how to get there. It is one thing to say that we want more equality. There is, I believe, already a broad public agreement on this, but still differences are forever increasing. This example shows that there is a fundamental need to re- distribute assets and not just to change attitudes.

Like many others, the two authors question the use of GDP measure. “What is measured is managed” the saying goes and the authors concur, but I am not very convinced by that argument; we have measured poverty or unemployment for decades, we still didn't get rid of it. It is not because Chinese leaders have decided on a number and being competent, they have a GDP growth of 9 percent; similarly, it is not because European leaders do not have sufficiently ambitious growth targets (on the contrary they have very ambitious targets which they never reach!) that their economies stumble a percent or two over decades.

In real life, the mechanisms that drive growth are rarely related to the measurement of GDP. Politics of the normal kind hardly affect GDP growth in the medium and long-term, because it is mainly the acts of corporations, the effects of technology and energy, and the growth, age and behavior of populations that determine what kind of growth we will have. In the very short term, governments can influence growth by introducing tax cuts, subsidies or austerity measures etc. The key economic agents—companies and consumers—don't care about GDP. Companies don't invest, expand or make profits or losses with an eye to the effects of the GDP. And consumers don't buy flat screen TVs to boost the GDP. Some of the most spectacular periods of economic growth occurred before there were any GDP measurement and public GDP targets.

By all means, do away with GDP; it is a rather meaningless measure. However, don't expect that to change too many things. And therefore don't put your bets on alternative measures either. They do play a role visualizing certain developments and they are therefore good to develop, but they are no game changers.

The weakness of the book is, in my view, that the authors don't address how to change the logic of property, profit (and other forms of capital accumulation) and competition. They write “A key question, then, is whether the profit motive is compatible with a non-growing economy”. In another part they say that higher labor productivity is almost always converted into higher production because business owners are beholden to profit motives. Although they do see the problems, their prescriptions fall short of addressing them. The book discusses the enormous gap in wealth in the world today, where 50 percent of the world's population shares 1 percent of global wealth. But there are no proposals in the book that will turn this around.

I look forward to the next book by Rob Dietz and Dan O'Neill where they advance their ideas further. They are on an important track: Enough is Enough is indeed good enough… Lagom!

You can read the authors introduction to the book here.

Energy is the substance of the economy

“The compounding mistake, ... was a wide-eyed belief that ‘globalisation’ would make everyone richer, when the reality was that the out-sourcing of production to emerging economies was a self-inflicted disaster with few parallels in economic history. One would have to look back to a Spanish empire awash with bullion from the New World to find a combination of economic idiocy and minority self-interest equal to the folly of globalization.”

 This was not written by Naomi Klein or Vandana Shiva but by Dr. Tim Morgan at Tullet Prebon, one of the largest inter-dealer money brokers in the world, in the report The Perfect Storm. It has a certain extra tang and interest when you get damning opinions about our economic system from those that profit from it and have inside insights, even if they don’t say so much different than the anti-capitalists.

The report is one of the most damning analysis of where the global economic system is headed and in particular where “the West” has gone. For coming from the finance sector it has also good insights in how important (cheap) energy is and has been in the capitalist saga. I probably helps that Dr Morgan studied history and political science.  The four interrelated trends that have brought us where we are, according to Dr Morgan are: 

First, the Western world is still mired in the fall-out from the ‘credit super-cycle’, a financial bubble so vast that it makes Dutch tulips, British south sea stock, the 1840s railway boom and “the roaring twenties” look like “little local difficulties.

Second, globalisation is now being exposed as a disaster which has driven a critical wedge between Western nations’ consumption and their production.

Third, policymakers and the public do not even have access to data reliable enough for an accurate appraisal of the predicament.

Most important – given that the economy is an energy dynamic, not a monetary construct – the critical surplus energy component is now in rapid and seemingly-irreversible decline.

“Reducing production, increasing consumption and taking on escalating debt to fill the gap was never a remotely sustainable course of action. What this in turn means is that no return to the pre-2008 world is either possible or desirable”.

The folly of the ever increasing indebtedness has been explained by many others. The reports states that: “Between 1981 and 2009, debt grew by 390% in real terms, far out-pacing the growth (of 120%) in the American economy. By 2009, the debt ratio had reached 381%, a level unprecedented in history. Even in 1930, when GDP collapsed, the ratio barely topped 300%.” Dr Morgan says that it is not the debt itself that is remarkable but how long this could go on. A main mechanism to have it going and supported by the public was the extended period of ever increasing property prices, reaching its highest level of folly in Japan where one square meter in Ginza in Tokyo fetched up to US$ 215,000, which is what you pay for 100,000 square meters of the best agriculture lands in the world (and those prices are also inflated!). Adding to the illusions was the innovation of new financial instruments, which supported lending also to those who could not afford it. While US economic growth was $4.1. trillion between 2001 and 2007, consumers increased their debt with an enormous $6.7 trillion.

The damning account of the follies of globalization was what surprises me most in the report. Dr Morgan dismisses the talk of Western economies modernizing themselves by moving from production into services as obscuring the fact that “Western consumers sold each other ever greater numbers of hair-cuts, ever  greater quantities of fast food and ever more zero-sum financial services whilst depending more and more on imported goods and, critically, on the debts used to buy them.”

Consumption by Americans increased by $6,500bn between 1981 and 2011, while consumption by their government rose by a further $1,700bn. Meanwhile, the combined output of the manufacturing, construction, agricultural and extractive industries grew by barely $600bn. Net exports of services was worth $200bn in 2011, i.e. far from sufficient in bridge the gap between consumption and production.

Dr Morgan delivers an interesting critique of the theory of competitive advantage (originating from David Ricardo) which has underpinned the globalization “project”. According to the theory, the general wealth will increase if all countries specialize in those activities in which they possess the greatest competitive advantage over others. “This logic is valid if – but only if – the scope for growth is infinite. Unfortunately, an unlimited capability for growth can only exist if the supply of resources is infinite as well.” says Dr Morgan.

I am not able to judge the accuracy of the third major cause of the mess, the distortion of data, but it is certainly remarkable. Dr Morgan claims that inflation figures, GDP figures and several other key economic data are inaccurate. The US GDP is inflated by 15% through various “imputations”, such as the “owner-equivalent rent” which includes the estimated “rent” that a house-owner would have paid for his house were it rented in the commercial market.  

”All goods and services on which money can be spent are the products of energy inputs either past, present or future.”

Many have claimed that our economy is mainly an energy equation. For example, I write in Garden Earth:

”A barrel of oil represents the energy of 25,000 hours of human toil, that is, 14 persons working round the year with normal Western labour standards. The cost for pumping the oil is not more than a few dollars per barrel, and even with an oil price of many hundred dollars per barrel, it is very cheap[...] From this perspective, our current wealth can be easily understood and demystified. Even hundreds of years ago, long before industrial society and capitalism, the person who had hundreds of others working solely for him or her could lead a comfortable life. ”

It is more unusual that persons submerged in the financial system have these insights. But Dr Morgan certainly has. He states that the economy is a physical construct based on energy rather than a financial construct based on money. We have been blinded by the fetish money (read more on this on The business plan of the factory is to produce externalities): “money is the language rather than the substance of the real economy. Ultimately, the economy is – and always has been – a surplus energy equation”.  From there he continues to discuss the huge impact on the economy that a declining Energy Return on Energy Invested (EROEI) will have. I explain EROEI in this recent post. 

Dr Morgan states that the average EROEI has gone down from 40:1 in 1990 to 17:1 in 2010 and might decline to just 11:1 by 2020. This would cause an average increase of energy costs with 50%. In this perspective it is worth noting that the EROEI of the famed US shale oil is somewhere around 4-5:1. With an EROEI the direct energy share of the GDP would go from 6.7% to 9.6%, and perhaps reach 15% by 2030. Notably, increased energy costs cascade through the whole economy, and will cause cumulative effects. 

Clearly, cheap energy has been one of the major drivers not only for our increasing wealth, but also for globalization and for the debt economy, “debt really amounts to ‘a claim on future energy”. Similarly, the end of cheap energy will mark a tectonic shift in our society.
   

I am a strong believer of the huge importance of energy for our society, but perhaps Dr Morgan goes just a bit too far here. The fact that a lot of development has used cheap energy as its main driver is not necessarily a proof that energy itself constitutes the essence of human society. He claims, for instance that it is likely that food production will decline with half if energy becomes scarce. True, energy has a very important role in today’s agriculture system (read for instance Why oil price and grain price follow each other or Agriculture: How cheap energy (and capitalism) increased the gaps between rich and poor), but this is also an effect of that energy is cheap.

Choosing between several options for increasing production and productivity, methods involving high energy use are likely to dominate when energy is cheap. It is cheap fossil energy that has made the widespread use of nitrogen fertilizers a cornerstone in the farming systems, but if chemical fertilizers become uneconomic to use, farmers will use more biological nitrogen fixation, nutrients that are now flushed to the waterways will be recycled etc. Cheap energy has also driven globalization and increasing international trade in foods, but many countries could produce more food if global competition was less, and prices higher. 

I missed an analysis of the effect of the demographic transition. It seems to me be a fifth important trend to consider.I also missed an analysis of which role capital accumulation and capitalism play in the system.

The report is worth while reading, and it has a number of provoking statements and amusing one-liners. 

We get richer also without growth

World manufacturing output grows much quicker than GDP. This is shown quite convincingly by Peter Marsh in his recent book "The New Industrial Revolution" which I am currently reading. His main point is that manufacturing is still very important, contrary to what we may believe when we live in a post-industrial society. He also states that the notion of "de-industrialization" of western econonmies is exaggerated.

While I agree with his point, the book raised some other thoughts. I picked the graph above from the book. Between 1800 and 2010, world manufacturing increased 200 times, while the GDP increased "only" some 60 times (for those interested in the effect of rather small differences in growth rate, this means that manufacturing output grew with 2.6% per year against 2% for GDP - not a big difference is it?)

This means that we don't only have more money today than ever before, we also get a lot more "stuff" for that money. E.g. between 1900 and 2000 US residential prices fell by approximately 94 %, adjusted for inflation - and people say energy has become expensive!
In the early industrialization of textile manufacturing productivity in spinning increased 1000-fold in two generations from the end of the eighteenth century in England (Ayres 1989). The increase in productivity is not unique for manufacturing. As a matter of fact the productivity gains in farming are equally impressive if not more. In the areas with lowest productivity, where farmers produce with more or less the same technology as 200 years ago, one person can produce not even 1 ton of grain per year, whereas the most productive farms exceed 2000 tons per person-year (Rundgren, Garden Earth, 2012). 150 years ago it took Swedish farms 250 hours of work to get one ton of barley from the field into the barn - today it takes five minutes with a combine harvester (Jordbruk och skogsbruk i Sverige sedan år 1900).

 

Endless fields of corn in Mato Grosso

There are many different observations possible from this. 

1) One obvious observation is that manufacturing will go in the same direction of farming, albeit slower. That is, the relative importance of manufacturing in the GDP will continue to decrease.Our needs of manufactured good certainly is not as easily saturated as our needs for food, but clearly there are limits to how many new "things" we need, and want to buy all the time.

A farmer in Zambia working manually

2) Because of productivity gains quicker than economic growth we can actually increase our standard of living (measured in "things") even without any economic growth, we get richer even if we don't get more money. Every year the same money buys us more things. This seams to be a rather strong argument for a non-growth economy.


3) Because of saturation in markets for manufacturing, and increasing competition, there are small possibilities to make profit from manufacturing:

"Stagnating demand will affect large segments of the industry in a similar way as agriculture suffered from lack of demand and falling prices for 100 years, despite an enormous population growth. The combination of increased competition, increased productivity and automation means constantly falling prices up to point where there is no profit to be made." (Garden Earth). Capital and capitalists need to find new arenas, and they find them today in three areas: 

• In privatization of society functions (schools, utilities, railroads etc.). I don't think i need to give any examples, they are everywhere in European countries and elsewhere
• In financial capital. The value of swaps and derivatives at the end of 2007 was US$ 454 trillion (ISDA 2009). This corresponded to some eight times the world GDP and around four times the global household wealth (Davies et al. 2008). The value of stocks in the 54 biggest markets in 2007 was more or less on par with the world GDP and the value of currency trading amounted to more than US$ 2 trillion per day (Reuters 2007), that is, more than 10 times the world GDP in a year.
• and in ecosystem services - measures to reduce carbon emissions or to compensate for emissions already represented a market worth US$ 143 billion in 2009 (World Bank 2010b). Following this path, we see more and more ecosystem services being regulated by market mechanisms, which is a euphemism for privatization.

4) That manufacturing output grows quicker than GDP contributes to the understanding why there is still such a strong link between GDP and use of energy and other nature resources. It is the production side of the so called "rebound effect" or "Jevons paradox", i.e. that saving are offset by increased consumption.

The myth of the country of opportunity

"A closer look at those at the top reveals a disproportionate role for rent-seeking: some have obtained their wealth by exercising monopoly power; others are CEOs who have taken advantage of deficiencies in corporate governance to extract for themselves an excessive share of corporate earnings; and still others have used political connections to benefit from government munificence – either excessively high prices for what the government buys (drugs), or excessively low prices for what the government sells (mineral rights)."

writes Joseph Stiglitz in an article, about inequality in the USA.

In Garden Earth I write:

A widespread myth is that United States is the country of opportunity; the success of the individual is in his or her own hands. This was in particular repeated in conjunction with Barack Obama being elected as President, and by Obama too in his speeches. One is told that American society is a model for how people can be successful if they just work hard. Perhaps this was true[1] in nineteenth–century United States when conditions were very different and where there were almost inexhaustible natural resources waiting to be exploited (well, if one doesn’t consider that Native Americans, salmon and bison already used the space), especially compared to Europe, which was still half feudal. But the growth of the welfare state in Europe and the closing of the frontier in the United States changed this radically. Studies comparing the United States and Great Britain, on the one hand, with Canada, Germany and Scandinavian countries, on the other hand, show that social mobility is considerably higher in the Scandinavian countries and Canada and to a lesser extent in Germany than in Great Britain and the United States (Blanden et al. 2005). 

This pattern coincides with the level of inequality so that the countries with the lower equality show less social mobility. Unfortunately, many Americans still seem to believe the opposite and nurture the myth that the only thing that needed to get rich is hard work and dedication. Consequently, even if rarely spelled out as clearly, if one is poor one is to blame oneself. Those who ‘win’ are in some way seen as ‘better’ and therefore they have the moral right to their wealth. Considering that most wealth is just circulated among the already wealthy, this simply gives a moral superiority to those who are already rich. This also seems to be the message from Christian fundamentalists who have adopted the virtues of wealth and success as expressed in Proverbs 10:22 ‘The blessing of the Lord brings wealth, and he adds no trouble to it,’ instead of the dull and depressing moral of Matthew 19:24 ‘Again I say to you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.’

I note that in comments to Stiglitz article as well as in many other articles on the same topic, many refer to that many have been brought out of poverty the last decades. That is certainly true. Unfortunately, the most impressive record for this poverty reduction comes from a dictatorship with no liberal-capitalist policies, China. A country where inequality is rampant and extend also into other spheres than economics.  

In have written many more posts on inequality. e.g. 


The monuments of the city are built on the backs of poor rural people
Location divide is more important than class divide today
Growing inequality, between people, between countries, between region, between urban and rural
Tale from the sandpit
Equality is good for growth, but growth is not necessarily good for equality

 

 

 

 

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[1]            For whites not subject to indentured labour; certainly not for the Native Americans or the African slaves.

growth is the religion of capitalism

There is no land left to settle, the last frontier we have left to civilize is ourselves.
(Jewel Kilcher, from the album cover of This Way, 2001)

In nature, some species are pioneers or colonizers; they are the first to invade ‘new’ lands, such as land created by lava from a volcano, the land after a forest fire, the naked land after a mudslide or other kind of erosion or land rising from the sea. These species prepare the land for a richer life. Normally, they are specialists in living on limited nutrients, such as lichens and moss. Human beings are also a kind of colonizer, even if certainly not the first ones to take new land into possession. The Swedish psychiatrist Nils Uddenberg (1993), in his book Ett djur bland alla andra?, writes that ‘the colonization stage of humanity is over. There is no new land to conquer; we have to learn how to live from the land we already have. Other paradigms have to replace the pioneer mentality.’.

This train of thought is not at all shared by those who see how the restless energy of capitalism constantly expands our world. ‘The conquest of the air may well be more important than the conquest of India was—we must not confuse geographical frontiers with economic ones,’ says Schumpeter (1942: 117), and his words are repeated today by almost all defenders of the existing system. In a limited sense he was correct; the airline industry perhaps has the same gross output as the GDP of India, and if it doesn’t, one can throw in the mobile networks, radio and television, all using the air for the service they provide.

But Schumpeter was also wrong because he didn’t see that the economy is a subsystem of nature and not the other way round. Although it is true that economic, geographic or biological limits should not be mixed up, this doesn’t mean that the economy can move any of the other limits. It just means that when one has reached the limit, expansion will have to take place somewhere else, which is exactly what is happening all the time and which is why capitalism is based on colonization and not on living within limits. Which is also why growth is the religion of capitalism, without it, it will crumble.
(Extract from Garden Earth)

From hunter and gatherers to global capitalism and thereafter

Fossil fuel allowed us to expand beyond the boundaries of location, but it doesn’t and will not allow us to expand beyond the boundaries of the planet. Capitalism and global markets force us to compete with everyone, to constantly produce more, to constantly grow. Fossil fuel and capitalism has formed a very strong couple, fortified by human values expressed as individualism and consumerism. “Capitalism” as a socio-economic system is harmful and does more bad than good.

There is no more natural capital to freely exploit, and the returns on extracting resources from nature are dwindling. Also social capital is decreasing as a result of the values of capitalism. The path ahead is to only use what can constantly be generated and regenerated from nature. We need to strengthen those institutions and values that build social coherence. Those are community action, civil society and cooperation instead of competition. We will have markets and we will need a state also in the future, but the relative importance of those institutions need to be radically tilted.

I believe those two paragraphs in the most succinct way explain what my book  
Garden Earth, from hunter and gatherers to global capitalism and thereafter,
is about. I sent the manuscript to proof-reading today.

Aging populations will end growth

Those that thinks that our society will continue along the same path forget that the Western European countries just have undergone a “once-in-the-millennium” demographic transition, which will never happen again, and that the USA are still in this transition and China has reached there as well. Throughout history of mankind, a relatively stable population has been normal and the rapid population growth of the last 200 years is the abnormal. The end to population growth is perhaps a bigger challenge for the capitalist project than the population explosion; after all, the population explosion had gone hand in hand with the capitalist expansion. A country like Japan has completed its transition and there has been virtually no growth for twenty ears and a constant "crisis". 

The changing population pyramid will change society. Many manufacturers, service providers and retailers are adapting their offers to be more appealing to rapidly growing groups of elderly, who are also used to be active consumers (earlier generations of old people were still not raised as “consumers”). Politically, the care for the elderly was earlier mainly a question of relief for the working generation, and it was their perspective that dominated; the elderly were “objects” rather than subjects. Today it is the old people themselves that shape how care of them is developed with a combination of political action and letting their considerable wealth speak. Less observed, but equally important, is the shift in values that will come.

The demographic transition shape societies. The big cohorts of young people that characterized the youth of capitalism and industrialism is the demographic reflection of the expansion and pioneership. Like with so many other things one can also turn this on the head and say that it was this demographic structure that drove capitalism in its early stages. It is not only economic growth that is propelled by a big share of young people; it is also the values typical for the young such as rejection of traditions, rebellion, glorification of strength, risk taking and body culture. Our current society's glorification of youth stands in stark contrast to the attitudes of earlier cultures. 

Society, but also many old themselves has a kind of youth obsession. Old people are expected to behave as “old youth” in a similar way as children were treated as “small adults” some hundred years ago. Eighty year olds engage in mountaineering, speed dating, wind surfing or parachuting: 

Former President George H.W. Bush marked his 85th birthday on Friday the same way he did his 75th and 80th birthdays: He leaped from a plane and zoomed downward at more than 100 mph in free fall before parachuting safely to a spot near his ocean front home.[...] He told reporters that he jumped Friday for two reasons: to experience the exhilaration of free-falling and to show that seniors can remain active and do fun things." Just because you're an old guy, you don't have to sit around drooling in the corner," Bush said  (AP 2009).

 This is about to change. Other properties, other characteristics of being human, will be in higher esteem for elderly people. Properties like maturity and reflection and even slowness (e.g. Slow Food) itself. Add to that, values such as care, spirituality and safety, opposition to risk-taking. Care for things close and interest in the beauty of and satisfaction by the small things in life are also typical for age, in contrast to youth's taste of exploration, expansion and novelties. The values of the old are better adapted to the values needed in a sustainable society. The combined effect of the shift in values and the effect on growth, caused by an aging population will be a strong determining factor the coming century. 

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7 Billion and Peak Child

The population follows our production system