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The case for contingency planning

The case for contingency planning

LONG-ODDS BET OR A PORTFOLIO OF SCENARIOS?

An intelligent investor – as distinct from a gambler – doesn’t put all his or her money on a single counter. He doesn’t stake everything on a single stock, a single sector, a single asset class, a single country or a single currency. The case for portfolio diversification rests on the existence of a multiplicity of possible outcomes, of plausible scenarios which differ from the investor’s ‘central-case’ assumption.

This isn’t a discussion of market theory, even though that’s a fascinating area, and hasn’t lost its relevance, even at a time when markets have become, to a large extent, adjuncts of monetary policy expectation. The concept of ‘value’ hasn’t been lost, merely temporarily mislaid.

Rather, it’s a reflection on the need to prepare for more than one possible outcome. Sayings to this effect run through history, attaining almost the stature of proverbs. “Hope for the best, prepare for the worst” is one example. Others include “strive for peace, but be prepared for war”, and “provide for a rainy day”. There’s a body of thought which has always favoured supplementing hope with preparation.

Dictionaries might not accept the term “mono-scenarial”, but it describes where we are, working to a single scenario, with scant preparedness for any alternative outcome. The orthodox line is that the economy will carry on growing in perpetuity. Obvious problems, such as the deteriorating economics of fossil fuels and the worsening threat to the environment, will be overcome using renewable energy and the alchemy of “technology”, with “stimulus” deployed to smooth out any economic pains of transition.

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Leaked report of the IPCC reveals that the growth model of capitalism is unsustainable

| Satellite image showing smoke from Siberian forest fires reaching the North Pole August 3 2021 | MR OnlineSatellite image showing smoke from Siberian forest fires reaching the North Pole (August 3, 2021). Image credit: Felton DavisFlickr.

Leaked report of the IPCC reveals that the growth model of capitalism is unsustainable

The second draft of the IPCC Group III report, focused on mitigation strategies, states that we must move away from the current capitalist model to avoid surpassing planetary boundaries and climate and ecological catastrophe). It also confirms our previous reports, covered by CTXT and The Guardian, that “greenhouse gas emissions must peak in the next four years”. The new leak acknowledges that there is little or no room for further economic growth.

The undersigned scientists and journalists have analyzed a new part of the Sixth Assessment Report, which has been leaked to us by the same sources as last time—Scientist Rebellion and Extinction Rebellion Spain. In this leak the usual more timid positions can be found, but also prominent statements that would have been unthinkable not long ago.

To contextualize, let’s just remember: In 1990, the First IPCC Report stated that, “the observed increase [in temperature] could be largely due to natural variability”, and although subsequent reports put this position to rest, this Sixth Report eliminates any possibility of doubt, and leaves no room for the climate denial arguments which have been historically and amply financed by those who had the most to benefit from maintaining this narrative: the fossil fuel lobbies.

The leaked report mentions that indefinite growth must be renounced. Since radical transition is required, the key question is how can a shift away from models of perpetual growth be understood as a benefit and not merely relinquishment? …

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Grappling with growth

Synergies and tensions between degrowth and people’s movements

We live in an age of converging crises. Only days ago the Intergovernmental Panel on Climate Change (IPCC) published a damning report on the state of the environmental crisis. At the same time, while a few countries are recuperating from the pandemic, an on-going third wave of Covid wreaks havoc across the Global South. In both crises, the economic imperative overrides other concerns and appears to render necessary changes illusory. Even among staunch proponents of our current economic system, calls for reform grow louder.1 The health and environmental crises are illustrative of broader tendencies: environmental disasters, rising global inequality, political polarization, a strengthening of right-wing extremism, anti-immigrant policies, and accompanying human misery.

In light of this, movements are mobilizing. Beyond reform, they argue that systemic changes are needed. Their struggles take a holistic view, emphasizing how the individual crises are entangled and driven by underlying structural factors. A question moving increasingly to the center of attention is growth itself as a driver of social inequality and unsustainability. Critics of growth argue that reckoning with environmental devastation and social inequality is directly tied to leaving behind the growth-paradigm. Among the frameworks and movements criticizing growth, degrowth is especially prevalent.

Degrowth argues that environmental sustainability and social justice necessitate transitioning beyond growth-reliance. In order to address social and environmental issues, we have to transition towards societies that are not just smaller in size but also operate according to a different logic – a logic that is not determined by the market sphere.2

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Buying our way out of pandemic malaise is hurting the planet, experts say

Buying our way out of pandemic malaise is hurting the planet, experts say

Some say the emphasis should be on well-being rather than economic growth

People line up to shop in Toronto. As COVID-19 cases eased in recent months, provinces have relaxed restrictions and encouraged people to spend again. But the emphasis on economic growth can come at the expense of environmental health. (Sam Nar/CBC)

Back in the spring, Canadian politicians spoke optimistically of a “two-dose summer,” signalling that a robust COVID-19 vaccination rollout would enable people to fully enjoy the warmer weather.

As COVID-19 infection numbers eased in recent months, provinces have relaxed restrictions and encouraged people to spend again.

While this was meant to provide a collective boost in the middle of a stubborn pandemic, this summer has put on another horror show of extreme weather — including a deadly heat dome and rampant wildfires in British Columbia and northwestern Ontario and drought in the Prairies.

Earlier this week, the United Nations’ Intergovernmental Panel on Climate Change (IPCC) issued a dire report that stated unequivocally that climate change was human-made and that some of its catastrophic effects were already on view.

The destruction we’re seeing now is fuelled by decades of environmental harm, but it is also coming at a time when politicians and marketers alike are prompting us to spend — whether it’s at the mall, at the car dealership or on so-called revenge travel.

Mass consumption inevitably adds stress to the natural world, in the form of resource extraction and carbon emissions.

“There is always discussion that we should as consumers spend money to fuel up businesses,” said Bengi Akbulut, assistant professor of geography, planning and environment at Concordia University in Montreal.

“But I think the broader tension [right now] is whether we can grow our way out of the ecological breakdown.”

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Crisis hiding in plain sight

Crisis hiding in plain sight

Putting a positive gloss on the news is especially important as we attempt to recover from a pandemic.  And if that positive gloss is green in colour, so much the better. And so yesterday we were treated to the news that:

“More electric vehicles were registered than diesel cars for the second month in a row in July, according to car industry figures.  It is the third time battery electric vehicles have overtaken diesel in the past two years.”

That is surely great news.  But as is usually the case in matters green, we are starting from a very low position.  Much more will have to be done to raise the number of battery-only EVs from the current nine percent of registrations in 2021 to the planned 100 percent by 2035.  Moreover, the current nine percent is a share of a dramatically depressed new car market… which is the real headline news in this story.

Nobody is actively covering this up; but they are playing it down.  According to the BBC piece which celebrates the rise in EV sales:

“However, new car registrations fell by almost a third…”

Insofar as the wellbeing or otherwise of the car industry has been a measure of the health of the wider economy throughout the oil age, a 29.5 percent collapse in new car sales ought to have been given far more prominence.  This is particularly true insofar as this year’s decline comes on the back of the massive lockdown-decline in 2020:

Instead we are treated to several implausible explanations for why this is nothing to worry about.  First, we are told, the decline is the result of people no longer wanting to buy diesel cars.  Certainly, there has been a collapse in demand for diesels in the wake of the Volkswagen scandal and government increases in tax on diesel vehicles…

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Beyond the Growth Imperative

For 30 years, environmental economist Tim Jackson has been at the fore of international debates on sustainability. Over a decade since his hugely influential Prosperity Without Growth, the world is both much changed – reeling from a pandemic and with unprecedented prominence for environmental issues – and maddeningly the same, still locked in a growth-driven destructive spiral. What does Jackson’s latest contribution, Post Growth, have to say about the way out of the dilemma?

Tim Jackson’s new book, Post Growth: Life after Capitalism (Polity Press, 2021), follows his ground-breaking Prosperity without Growth (2009, updated in 2017). Whilst the previous work reflected, partly, the austerity-driven answers to the Great Recession, Post Growth falls into a different world. It is a world where the recognition of climate change as the greatest challenge facing humankind is moving towards consensus. In the United States, even the Republican Party’s younger members are looking for ways out of the corner into which the party has manoeuvred itself. It is also a world where the Covid-19 pandemic has not only taken many lives and destroyed many livelihoods, but – via the need for state intervention – has also dealt a blow to the gung-ho neoliberalism that is one of the main culprits of financial chaos and the looming breakdown of planetary life-support systems.

US President Joe Biden’s rescue plan as well as the EU’s Next Generation pandemic recovery fund are questioning the free-market paradigm that has held sway the since the Reagan-Thatcher area, and that had trickled down into centre-left politics as well. In parallel, from the Paris Agreement to the European Commission’s European Green Deal, environmental concerns that were condescendingly smiled upon until recently have now moved centre stage. The newly discovered role for the state and the emerging environmental consciousness might not be discussed at length in Jackson’s new book, but they are the backdrop against which it is to be read.

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The Necessary Climate Solution No-one is Talking About

The Necessary Climate Solution No-one is Talking About

For all the talk of renewable energy, electric vehicles and plant-based diets, there’s a gaping hole in the way we’re trying to solve accelerating climate change.

We will not stay below 2°C of warming while pursuing economic growth – yet barely anyone talks about it.

Since the end of World War II Gross Domestic Product (GDP) growth has been the metric of human prosperity in Western nations – the idea being that if the productivity of the economy increases so will the wellbeing of the people within that economy. And for a while that was the case – but since the 1970’s increases in GDP have, on average, failed to translate into increases in wellbeing and happiness.

It is not surprising. Research has shown that once a certain GDP threshold, or level of wellbeing, has been met people gain little from consuming more ‘stuff’ – a necessary requirement for continuous GDP growth.

Robert F Kennedy eloquently summed up the inadequacy of GDP as a metric of wellbeing at a speech he gave in 1968:

[t]he gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.

It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.

What’s more, GDP has never been, and can’t be, decoupled from material footprint, including energy[i]. This means we cannot roll out renewable energy fast enough to meet the objectives of the Paris Agreement – to keep warming below 2°C – if we continue growing our economy.

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Our World Is Dying Because We Don’t Value Un-Making Things

Our World Is Dying Because We Don’t Value Un-Making Things

Listen to a reading of this article:

I talk a lot about how we’re destroying our environment with a global system where human behavior is driven by the pursuit of profit, how the power structure which dominates that system does so by violence, exploitation, oppression, and the threat of nuclear war, and how we’re all going to die if we don’t change this system.

Whenever I say this I get a bunch of capitalism cultists bleating “You just don’t understand economics bruh,” which is the line they’ve been trained to say to anyone they see criticizing capitalism. It’s silly for a number of reasons, among them the fact that nobody who regurgitates that line understands economics themselves, and the fact that one’s understanding of economics has nothing to do with the death of the ecosystem our species relies on for survival.

The claim that anyone who opposes capitalism “just doesn’t understand economics” is premised on the notion that unfettered capitalism is the best way for a civilization to attain economic growth, which is arguably true; governments like China saw their economies explode when they started implementing elements of capitalism for pragmatic reasons. If you want to create a bunch of stuff and generate a tremendous amount of wealth, a good way to do that is by giving the capitalist class the protection of the state so they can rake in billions of dollars exploiting the global proletariat without being guillotined.

Problem is, that only looks like a valid point if economic growth is the only value by which you judge a system’s success. If you value quality of life, overall happiness, health, average lifespan, education, eliminating poverty, homelessness and hunger, and many other possible metrics, nations like the United States are far from ideal

…click on the above link to read the rest of the article…

The Anthropocene

The Anthropocene

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

df
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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Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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