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Reclaiming hope from the dismal science
Reclaiming hope from the dismal science
Post Growth is published by Polity Press, 2021.
“Empowering and elegiac” might seem a strange description of a book on economics. Yet the prominent author and former economics minister of Greece, Yanis Varoufakis, chooses that phrase of praise for the new book Post Growth, by Tim Jackson.
In many respects the book lives up to that billing, and in the process Post Growth offers a hopeful vision of its subtitle: Life After Capitalism.
My dictionary defines an elegy as “a poem of serious reflection, typically a lament for the dead.” In writing an obituary for capitalism, paradoxically, Jackson also gives us a glimpse of a far richer way of life than anything capitalism could afford us.
Along the way he takes us through the origins and later distortion of John Stuart Mill’s theory of utilitarianism; the demonstration by biologist Lynn Margulis that cooperation is just as important an evolutionary driver as is competition; the psychology of ‘flow’ popularized by Mihalyi Csikszentmihalyi; and the landscape-transforming campaigns of Kenyan environmental justice activist Wangari Maathai.
Jackson accomplishes all this and more, elegantly and with clarity, in less than 200 pages.
The dismal science and its fairytales
Since the mid-19th century, under the influence of the ideals of competition and survival of the fittest, economics has earned the sobriquet “the dismal science”. At the same time, contemporary economics grew in significant part from the theories of Jeremy Bentham and John Stuart Mill, in which the goal of economics would be the greatest happiness for the greatest number of people. During our lifetimes, mainstream economics has proclaimed a gospel of unending economic growth. What gives?
In Mill’s day, Jackson writes, the word ‘utility’ was “a kind of direct proxy for happiness.” But meanings change:
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The G-7’s Reckless Commitment To Mounting Debt
The G-7’s Reckless Commitment To Mounting Debt
Historically, meetings of the largest economies in the world have been essential to reach essential agreements that would incentivise prosperity and growth. This was not the case this time. The G7 meeting agreements were light on detailed economic decisions, except on the most damaging of them all. A minimum global corporate tax. Why not an agreement on a maximum global public spending?
Imposing a minimum global corporate tax of 15% without addressing all other taxes that governments impose before a business reaches a net profit is dangerous. Why would there be a minimum global corporate tax when subsidies are different, some countries have different or no VAT rates (value added tax), and the endless list of indirect taxes is completely different? The G7 “commit to reaching an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable multinational enterprises”. This entire sentence makes no sense, opens the door to double taxation and penalizes the most competitive and profitable companies while it has no impact on the dinosaur loss-making or poor-margin conglomerates that most governments call “strategic sectors”.
The global minimum corporate tax is also a protectionist and extractive measure. The rich nations will see little negative impact from this, as they already have their governments surrounded by large multinationals that will not suffer a massive taxation blow because subsidies and tax incentives before net income are large and generous. According to PWC’s Paying Taxes 2020 (https://www.pwc.com/gx/en/paying-taxes/pdf/pwc-paying-taxes-2020.pdf), profit taxes in North America already stand at 18.5% but, more worryingly, total tax contributions including labour and other taxes reach 40% of revenues. In the EU & EFTA profit taxes may be somewhat smaller than in North America, but total taxation remains above 39% of revenues.
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The Abuse of Public Debt–And How It Sets the Stage For Economic Disaster
The 2020–21 recession has been devastating for the global economy. It has been ninety years since the global economy last suffered through a recession of this magnitude (in the Great Depression). Nonetheless, it seems that the social effects of the current recession have not yet come about. The reason for this disparity between cold macroeconomic data and popular sentiment can be found in the enormous public spending by practically all of the countries in the world.1
This article argues that exorbitant increases in public debt, such as those seen in 2020, are not free. It examines the potential economic effects of accumulating vast quantities of public debt.
The First Problem: Less Economic Growth
The countries with the greatest amount of public debt saw per capita income grow the least, as seen in chart 1.
Chart 1: GDP Growth per Capita
Source: Kumar and Woo. Created with Datawrapper
The economic mechanism that explains this statistical relationship is relatively simple. An excessive public debt causes the so-called expulsion effect, in which credit is redirected from the private sector to the public sector. The growth of public debt deprives the private sector of loanable funds, reducing the generation of wealth. (It is the private sector that generates economic activity. The most the public sector can aspire to do is to establish a framework that favors private endeavors.)
The Second Problem: Disincentivizing Investment and Reducing Productivity
This second problem is an extension of the first. One of the best indicators of an economy’s future growth is its investment rate. When investment increases, so too does productivity, which is accompanied by economic growth.
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Exponentiality Leads to Finality
EXPONENTIALITY LEADS TO FINALITY
As technological developments and markets go parabolic, we observe many market “experts”, even intelligent ones, forecasting that we are now in an exponential economic era. Thus many believe that this will go on forever. This is the typical attitude at market and economic tops and guarantees that THIS WILL NOT END WELL!
It is clearly absolute nonsense to believe that exponential expansion based on deficits, debts and fake money is the beginning of a new era. Anyone studying the economy and history of markets knows that exponential moves indicate the end of an era and not the beginning. As I have repeatedly said, history is our best teacher and it both rhymes and repeats itself. And history now gives us dire warnings.
ARE WE IN A PARADIGM SHIFT?
But for some reason, human beings always extrapolate current trends whether it is population growth or stock market rallies. We know from statements at historical tops like 1929, 1987 or 2000 that anyone, from politicians to investors at the time, believe that the trend will go on for ever and that the world has made a paradigm shift.
Many markets and investments are now going up exponentially and very few forecast an end to this euphoric state.
GLOBAL POPULATION TO HALVE?
Let’s start with global population. For thousands of years we saw a very slow and steady growth as the graph below shows. In the mid 1850s world population reached 1 billion.
Since the mid 1800s, we have seen exponential growth in population and we are now almost 8 billion people on earth.
Energy and oil in particular plays a major role in this growth, leading to increases in food production, industrialisation, better health care for people etc.
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The idea of ‘green growth’ is flawed. We must find ways of using and wasting less energy
As countries explore ways of decarbonising their economies, the mantra of “green growth” risks trapping us in a spiral of failures. Green growth is an oxymoron.
Growth requires more material extraction, which in turn requires more energy. The fundamental problem we face in trying to replace fossil energy with renewable energy is that all our renewable technologies are significantly less energy dense than fossil fuels.
This means much larger areas are required to produce the same amount of energy.
Earlier this year, data from the European Union showed renewable electricity generation has overtaken coal and gas in 2020. But previous research argued that to replace the total energy (not just electricity) use of the UK with the best available mix of wind, solar and hydroelectricity would require the entire landmass of the country. To do it for Singapore would require the area of 60 Singapores.
I am not in any way denying or diminishing the need to stop emitting fossil carbon. But if we don’t focus on reducing consumption and energy waste, and instead fixate on replacing fossil fuels with renewable energy, we are simply swapping one race to destruction with another.
The carbon causing our climate problem today came from fossilised biology formed through ancient carbon cycles, mostly over the 200 million years of the Mesozoic era (ending 66 million years ago).
We must stop burning fossil fuels, but we must also understand that every technology to replace them, while attempting to maintain our current consumption, let alone allowing for consumption growth, requires huge amounts of fossil energy.
Environmental impact of renewables
Carbon reduction without consumption reduction is only possible through methods that have their own massive environmental impacts and resource limitations.
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The American infrastructure, ancient Rome and ‘Limits to Growth’
The American infrastructure, ancient Rome and ‘Limits to Growth’
Infrastructure is the talk of the town in Washington, D.C. where I now live and with good reason. The infrastructure upon which the livelihoods and lives of all Americans depends is in sorry shape. The American Society of Civil Engineers 2021 infrastructure report card gives the United States an overall grade of C minus.
Everyone in Washington, yes, everyone, believes some sort of major investment needs to be made in our transportation, water, and sewer systems which have been sorely neglected. There are other concerns as well about our energy infrastructure and our communications infrastructure—both of which are largely in private hands. The wrangling over how much will be spent and on what is likely to go on for months.
What won’t be talked about is that the cost of maintaining our infrastructure is rising for one key reason: There’s more it every day. We keep expanding all these systems so that when they degrade and require maintenance and replacement, the cost keeps growing.
There is a lesson on this from ancient Rome. Few modern people understand that the Romans financed their expansion and government operations using the booty taken from vanquished territories. That worked until it didn’t. When Rome reached its maximum expanse, when it no longer conquered new territories, the booty stopped coming. With the borders of Rome the longest the empire had ever had to defend, it now relied primarily on taxes to finance a large army and administrative presence across the empire in order to maintain control.
Our modern-day version of booty has been cheap energy, much of it supplied by the oil, natural gas and coal fields of America and later its uranium mines…
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Today’s Contemplation: Collapse Cometh XV
Energy. It’s at the core of everything we do. Everything. Yet we take it for granted and rarely think about it and what the finiteness of our various energy sources means for us.
As Gail Tverberg of Our Finite World concludes in a recent thought-provoking article that should be read widely: “Needless to say, the powers that be do not want the general population to hear about issues of these kinds. We find ourselves with narrower and narrower news reports that provide only the version of the truth that politicians and news media want us to read.”
Instead of having a complex and very necessary discussion about the unsustainable path we are on (especially as it pertains to chasing the perpetual growth chalice) and attempting to mitigate the consequences of our choices, we are told all is well, that ‘science’, ‘human ingenuity’, and ‘technology’ will save the day, and we can maintain business-as-usual with just some minor ‘tweaks’ and/or a ‘green/clean’ energy transition. Pre/history, physics, and biology would suggest otherwise.
Here is my relatively long comment on a Tyee article discussing the International Energy Agency’s recent report that calls on all future fossil fuel projects to be abandoned and drastic reductions in demand in order to avoid irreparable climate change damage to our planet. The answer, however, will not be found in ‘renewable’ energy and related technologies as many contend because the underlying and fundamental issue of overshoot has been conveniently left out of the story.
* * *
Having followed the ‘energy’ dilemma for more than a decade I’ve come to better understand the complexities, nuances, and scheming that it entails; not all mind you, not by a long shot, but certainly better than the mainstream narratives provide…
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Our rapid ascent in energy and resource use has distorted our view of “normal”
Our rapid ascent in energy and resource use has distorted our view of “normal”
The new reality warns we are on a collision course with Earth’s finite limits —–
Tom Murphy
“The delirious ascent in energy and resource use witnessed over the past few centuries has been accomplished via the rapid, accelerating expenditure of a one-time inheritance of natural resources—a brief and singularly remarkable era in the long saga of human history. It has produced a dangerously distorted impression of what “normal” looks like on this planet. …Thus far, heeding physical boundaries has not been necessary for the most part, as the scale of human endeavors has only recently become significant in a planetary context. We are now entering into a new reality: one in which our ambitions are on a collision course with natural limits on a finite planet. It is a slow-motion trajectory that has been apparent to some for an embarrassingly long time*, but not yet acute enough to have grabbed the lasting attention of the majority. [*D H Meadows et al. The Limits to Growth: A Report for the Club of Rome’s Project on the Predicament of Mankind. Universe Books, 1974]” —Tom Murphy
Tom Murphy is an associate professor of physics at the University of California, San Diego. Murphy’s keen interest in energy topics began with his teaching a course on energy and the environment for non-science majors at UCSD. Following his natural instincts to educate, Murphy is eager to get people thinking about the quantitatively convincing case that our pursuit of an ever-bigger scale of life faces gigantic challenges and carries significant risks.
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Get Ready for a Wild “Base Effect”: Highlighted Forcefully when it Suits Them, as with Inflation; Silenced Forcefully When it’s Awkward, as with Corporate Earnings
Get Ready for a Wild “Base Effect”: Highlighted Forcefully when it Suits Them, as with Inflation; Silenced Forcefully When it’s Awkward, as with Corporate Earnings
We’re going to be awash in huge and even absurd percentage-growth numbers.
The numbers are starting to crop up everywhere: For example, new vehicle sales in March jumped nearly 60% from March a year ago. But last March was the beginning of the lockdowns. Compared to two years ago, March 2019, new vehicle sales were down 1.2%. In the first quarter, new vehicle sales were up 11% year-over-year, but were down 2.9% from Q1 2019.
Today, the New York Fed released its latest Weekly Economic Index (WEI), one of the high-frequency measures that came out of the crisis. The index is based on ten daily and weekly indicators of real economic activity, compared to the same time last year, and is scaled to line up with year-over-year GDP growth. Last year, it fairly accurately predicted GDP growth, I mean plunge.
In Q1 2020, GDP had dropped sharply, and in Q2 2020, it plunged. The year-over-year growth rate of the upcoming GDP report compares the dollar GDP in Q1 2021 to that of Q1 2020. Given the sharply lower dollar GDP in Q1 2020, and the plunge in Q2 2020, the year-over-year growth rates for Q1 and Q2 this year will be massive, even as GDP in dollars will likely remain below where it had been in Q4 2019. But these are the kinds of year-over-year percentage spikes we’re going to see, even as dollar figures have not reached back to 2019 levels:
Another example, to dip into absurdity: The TSA reports daily checkpoint screenings, a measure of how many people entered into airports. Airlines were essentially shutting down last April and the number of passengers collapsed by over 90%, to just a trickle. Compared to 2019, the current 7-day moving average of daily checkpoint screenings is still down 37%, but compared to a year ago, it spiked by 1,168%.
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Do You Believe in Magic?
The people pretending to run the world’s financial affairs do. The more layers of abstract game-playing they add to the existing armatures of unreality they’ve already constructed, the more certain it becomes that they will blow up all the support systems of a sunsetting hyper-tech economy that now has no safe lane to continue running in.
Virtually all the big nations are doing this now in desperation because they don’t understand that the hyper-tech economy is hostage to the deteriorating economics of energy, basically fossil fuels, and oil especially. The macro mega-system can’t grow anymore. We’re now in the de-growth phase of a dynamic that pulsates through history, as everything in the universe pulsates. We attempted to compensate for de-growth with debt, borrowing from the future.
But debt only works in the youthful growth phases of economic pulsation, when the prospect of being paid back is statistically favorable. Now in the elder de-growth phase, the prospect of paying back debts, or even servicing the interest, is statistically dismal. The amount of racked-up debt worldwide has entered the realm of the laughable. So, the roughly twenty-year experiment in Central Bank credit magic, as a replacement for true capital formation, has come to its grievous end.
Hence, America under the pretend leadership of Joe Biden ventures into the final act of this melodrama, which will end badly and probably pretty quickly. They are about to call in the financial four horsemen of apocalypse: 1) Modern Monetary Theory (MMT), 2) a command economy, 3) Universal Basic Income (UBI, “helicopter” money for the people), and 4) the “Build Back Better” infrastructure scheme.
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money, monetary theory, modern monetary theory, debt, money printing, james howard kunstler, clusterfuck nation, magic, degrowth, growth
Are We Staring At A Coming Systemic Breakdown & The End Of Capitalism?
For any problems they face, governments all over the world are now conditioned to simply deficit spend or issue new $trillions in ‘thin air’ currency.
So how in danger are we of that recklessness leading to a breakdown of the entire system?
Respected financial analyst Michael Every suspects we’re closer than most realize.
As governments continue to flood the world with debt-funded stimulus, they not only fan the flames under the social powderkeg of wealth inequality, but they are destroying their own powers in the process.
Up until the Great Financial Crisis, a dollar in new federal debt issued resulted in more than $1 in incremental GDP. But no longer:
That indicates the government is now at the ‘pushing on a string’ phase: it can’t grow out of its problems. Issuing new debt only digs the insolvency hole deeper at this point.
Which is why Michael agrees that now, more than ever, is the time to partner with a financial advisor who understands the nature of the risks and opportunities in play, can craft an appropriate portfolio strategy for you given your needs, and apply sound risk management protection where appropriate:
adam taggart, peak prosperity, michael every, rabobank, capitalism, money printing, credit expansion, central banks, monetary stimulus, growth, risk
Energy and Human Ambitions on a Finite Planet
Energy and Human Ambitions on a Finite Planet
Where is humanity going? How realistic is a future of fusion and space colonies? What constraints are imposed by physics, by resource availability, and by human psychology? Are default expectations grounded in reality?
This textbook, written for a general-education audience, aims to address these questions without either the hype or the indifference typical of many books. The message throughout is that humanity faces a broad sweep of foundational problems as we inevitably transition away from fossil fuels and confront planetary limits in a host of unprecedented ways—a shift whose scale and probable rapidity offers little historical guidance.
Salvaging a decent future requires keen awareness, quantitative assessment, deliberate preventive action, and—above all—recognition that prevailing assumptions about human identity and destiny have been cruelly misshapen by the profoundly unsustainable trajectory of the last 150 years. The goal is to shake off unfounded and unexamined expectations, while elucidating the relevant physics and encouraging greater facility in quantitative reasoning.
After addressing limits to growth, population dynamics, uncooperative space environments, and the current fossil underpinnings of modern civilization, various sources of alternative energy are considered in detail— assessing how they stack up against each other, and which show the greatest potential. Following this is an exploration of systemic human impediments to effective and timely responses, capped by guidelines for individual adaptations resulting in reduced energy and material demands on the planet’s groaning capacity. Appendices provide refreshers on math and chemistry, as well as supplementary material of potential interest relating to cosmology, electric transportation, and an evolutionary perspective on humanity’s place in nature.
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finite resources, finite planet, growth, thomas w. murphy jr.
What Interest Rate Triggers The Next Crisis?
What Interest Rate Triggers The Next Crisis?
- The Ten-year U.S. Treasury note yields 1.61%.
- 10-year high-quality corporate bonds yield 2.09%.
- The rate on a 30-year mortgage is 3.05%.
Despite recent increases, interest rates are hovering near historic lows. We do not use the word “historic” lightly. By “historic,” we refer to the lowest levels since the nation’s birth in 1776.
The graph below, courtesy of the Visual Capitalist, highlights our point.
Despite 300-year lows in interest rates, investors are becoming anxious because they are rising. Recent history shows they should worry. A review of the past 40 years reveals sudden spikes in interest rates and financial problems go hand in hand.
The question for all investors is how big a spike before the proverbial hits the fan again?
Debt-Driven Economy
Over the past 40 years, debt has increasingly driven economic growth.
That statement on its own tells us nothing about the health of the economy. To better quantify the benefits or consequences of debt, we need to understand how it was used.
When debt is used productively, the interest and principal are covered with higher profits and sustained economic activity. Even better, income beyond the cost of the debt makes the nation more prosperous.
Conversely, unproductive debt may provide a one-time spark of economic activity, but it yields little to no residual income to service it going forward. Ultimately it creates an economic headwind as servicing the debt in the future replaces productive investment and or consumption.
The graph below shows the steadily rising ratio of total outstanding debt to GDP. If debt, in aggregate, were productive, the ratio would be declining regardless of the amount of debt.
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On a finite planet, maintaining endless economic growth is not a viable option
On a finite planet, maintaining endless economic growth is not a viable option
Cooperative conservatism could help to get us off growth with minimum pain and maximum gain, says Richard Heinberg. —
Richard Heinberg
“Both the U.S. economy and the global economy have expanded dramatically in the past century, as have life expectancies and material progress. Economists raised in this period of plenty assume that growth is good, necessary even, and should continue forever and ever without end, amen. Growth delivers jobs, returns on investment and higher tax revenues. What’s not to like? We’ve gotten so accustomed to growth that governments, corporations and banks now depend on it. It’s no exaggeration to say that we’re collectively addicted to growth. The trouble is, a bigger economy uses more stuff than a smaller one, and we happen to live on a finite planet…. Engineering a happy conclusion to the growth binge of the past century might be challenging. But it’s not impossible. Granted, we’re talking about an unprecedented, coordinated economic shift that would require political will and courage. Perhaps we could think of it as cooperative conservatism (since its goal would be to conserve nature while maximizing mutual aid). It would require a lot of creative thinking on everyone’s part.” — Richard Heinberg, Post Carbon Institute
Richard Heinberg is an American journalist and educator who has written extensively on energy, economic, and ecological issues, including oil depletion. He presently serves as the senior fellow at the Post Carbon Institute.
Below is my repost of Richard’s latest contribution delivered with concise clarity and with my added subheadings, text highlighting, selected bulletted formatting, and images. Alternatively, to read his original piece on the Post Carbon Institute’s website, click on the following linked title.
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