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CommUnity of Minds

Abandoning Growth

Herman Daly writes: A steady-state economy is incompatible with continuous growth—either positive or negative growth. The goal of a steady state is to sustain a constant, sufficient stock of real wealth and people for a long time. A downward spiral of negative growth, a depression such as we are entering now, is a failed growth economy, not a steady-state economy. Halting an accelerating downward spiral is necessary, but is not the same thing as resuming continuous positive growth. The growth economy now fails in two ways: (1) positive growth becomes uneconomic in our full-world economy; (2) negative growth, resulting from the bursting of financial bubbles inflated beyond physical limits, though temporarily necessary, soon becomes self-destructive. That leaves a non-growing or steady-state economy as the only long run alternative. The level of physical wealth that the biosphere can sustain in a steady state may well be below the present level. The fact that recent efforts at growth have resulted mainly in bubbles suggests that this is so. Nevertheless, current policies all aim for the full re-establishment of the growth economy. No one denies that our problems would be easier to solve if we were richer. The question is, does growth any longer make us richer, or is it now making us poorer? I will spend a few more minutes cursing the darkness of growth, but will then try to light ten little candles along the path to a steady state. Some advise me to forget the darkness and focus on the policy candles. But I find that without a dark background the light of my little candles is not visible in the false dawn projected by the economists, whose campaigning optimism never gives hope a chance to emerge from the shadows. We have many problems (poverty, unemployment, environmental destruction, budget deficit, trade deficit, bailouts, bankruptcy, foreclosures, etc.), but apparently only one solution: economic growth, or as the pundits now like to say, “to grow the economy”-- as if it were a potted plant with healing leaves, like aloe vera or marijuana. But let us stop right there and ask two questions that all students should put to their economics professors. First, there is a deep theorem in mathematics that says when something grows it gets bigger! So, when the economy grows it too gets bigger. How big can the economy be, Professor? How big is it now? How big should it be? Have economists ever considered these questions? And most pointedly, what makes them think that growth (i.e., physical expansion of the economic subsystem into the finite containing biosphere), is not already increasing environmental and social costs faster than production benefits, thereby becoming uneconomic growth, making us poorer, not richer? After all, real GDP, the measure of “economic” growth so-called, does not separate costs from benefits, but conflates them as “economic” activity. How would we know when growth became uneconomic? Remedial and defensive activity becomes ever greater as we grow from an “empty-world” to a “full-world” economy, characterized by congestion, interference, displacement, depletion and pollution. The defensive expenditures induced by these negatives are all added to GDP, not subtracted. Be prepared, students, for some hand waving, throat clearing, and subject changing. But don’t be bluffed. Second question; do you then, Professor, see growth as a continuing process, desirable in itself-- or as a temporary process required to reach a sufficient level of wealth which would thereafter be maintained more or less in a steady state? At least 99% of modern neoclassical economists hold the growth forever view. We have to go back to John Stuart Mill and the earlier Classical Economists to find serious treatment of the idea of a non-growing economy, the Stationary State. What makes modern economists so sure that the Classical Economists were wrong? Just dropping history of economic thought from the curriculum is not a refutation! (06/08/09)

To Make a New Beginning

Barack Obama speaking in Cairo, Egypt: I've come here to Cairo to seek a new beginning between the United States and Muslims around the world, one based on mutual interest and mutual respect, and one based upon the truth that America and Islam are not exclusive and need not be in competition.  Instead, they overlap, and share common principles -- principles of justice and progress; tolerance and the dignity of all human beings. I do so recognizing that change cannot happen overnight.  I know there's been a lot of publicity about this speech, but no single speech can eradicate years of mistrust, nor can I answer in the time that I have this afternoon all the complex questions that brought us to this point.  But I am convinced that in order to move forward, we must say openly to each other the things we hold in our hearts and that too often are said only behind closed doors.  There must be a sustained effort to listen to each other; to learn from each other; to respect one another; and to seek common ground.  As the Holy Koran tells us, "Be conscious of God and speak always the truth."  That is what I will try to do today -- to speak the truth as best I can, humbled by the task before us, and firm in my belief that the interests we share as human beings are far more powerful than the forces that drive us apart. Now part of this conviction is rooted in my own experience. I'm a Christian, but my father came from a Kenyan family that includes generations of Muslims.  As a boy, I spent several years in Indonesia and heard the call of the azaan at the break of dawn and at the fall of dusk.  As a young man, I worked in Chicago communities where many found dignity and peace in their Muslim faith. As a student of history, I also know civilization's debt to Islam.  It was Islam -- at places like Al-Azhar -- that carried the light of learning through so many centuries, paving the way for Europe's Renaissance and Enlightenment.  It was innovation in Muslim communities -- it was innovation in Muslim communities that developed the order of algebra; our magnetic compass and tools of navigation; our mastery of pens and printing; our understanding of how disease spreads and how it can be healed.  Islamic culture has given us majestic arches and soaring spires; timeless poetry and cherished music; elegant calligraphy and places of peaceful contemplation.  And throughout history, Islam has demonstrated through words and deeds the possibilities of religious tolerance and racial equality. I also know that Islam has always been a part of America's story.  The first nation to recognize my country was Morocco.  In signing the Treaty of Tripoli in 1796, our second President, John Adams, wrote, "The United States has in itself no character of enmity against the laws, religion or tranquility of Muslims."  And since our founding, American Muslims have enriched the United States.  They have fought in our wars, they have served in our government, they have stood for civil rights, they have started businesses, they have taught at our universities, they've excelled in our sports arenas, they've won Nobel Prizes, built our tallest building, and lit the Olympic Torch.  And when the first Muslim American was recently elected to Congress, he took the oath to defend our Constitution using the same Holy Koran that one of our Founding Fathers -- Thomas Jefferson -- kept in his personal library. So I have known Islam on three continents before coming to the region where it was first revealed.  That experience guides my conviction that partnership between America and Islam must be based on what Islam is, not what it isn't.  And I consider it part of my responsibility as President of the United States to fight against negative stereotypes of Islam wherever they appear. ... I know there are many -- Muslim and non-Muslim -- who question whether we can forge this new beginning.  Some are eager to stoke the flames of division, and to stand in the way of progress.  Some suggest that it isn't worth the effort -- that we are fated to disagree, and civilizations are doomed to clash. Many more are simply skeptical that real change can occur.  There's so much fear, so much mistrust that has built up over the years.  But if we choose to be bound by the past, we will never move forward.  And I want to particularly say this to young people of every faith, in every country -- you, more than anyone, have the ability to reimagine the world, to remake this world. All of us share this world for but a brief moment in time. The question is whether we spend that time focused on what pushes us apart, or whether we commit ourselves to an effort -- a sustained effort -- to find common ground, to focus on the future we seek for our children, and to respect the dignity of all human beings. It's easier to start wars than to end them.  It's easier to blame others than to look inward.  It's easier to see what is different about someone than to find the things we share.  But we should choose the right path, not just the easy path.  There's one rule that lies at the heart of every religion -- that we do unto others as we would have them do unto us. This truth transcends nations and peoples -- a belief that isn't new; that isn't black or white or brown; that isn't Christian or Muslim or Jew.  It's a belief that pulsed in the cradle of civilization, and that still beats in the hearts of billions around the world.  It's a faith in other people, and it's what brought me here today. We have the power to make the world we seek, but only if we have the courage to make a new beginning, keeping in mind what has been written. The Holy Koran tells us:  "O mankind!  We have created you male and a female; and we have made you into nations and tribes so that you may know one another." The Talmud tells us:  "The whole of the Torah is for the purpose of promoting peace." The Holy Bible tells us:  "Blessed are the peacemakers, for they shall be called sons of God." The people of the world can live together in peace.  We know that is God's vision.  Now that must be our work here on Earth. (06/04/09)

You are Brilliant, and the Earth is Hiring

Paul Hawken speaking to the 2009 graduates of the University of Portland: Hey, Class of 2009: you are going to have to figure out what it means to be a human being on earth at a time when every living system is declining, and the rate of decline is accelerating. Kind of a mind-boggling situation -- but not onepeer-reviewed paper published in the last thirty years can refute that statement. Basically, the earth needs a new operating system, you are the programmers, and we need it within a few decades. This planet came with a set of operating instructions, but we seem to have misplaced them. Important rules like don't poison the water, soil, or air, and don't let the earth get overcrowded, and don't touch the thermostat have been broken. Buckminster Fuller said that spaceship earth was so ingeniously designed that no one has a clue that we are on one, flying through the universe at a million miles per hour, with no need for seatbelts, lots of room in coach, and really good food -- but all that is changing. There is invisible writing on the back of the diploma you will receive, and in case you didn't bring lemon juice to decode it, I can tell you what it says: You are brilliant and the Earth is hiring. The earth couldn't afford to send any recruiters or limos to your school. It sent you rain, sunsets, ripe cherries, night blooming jasmine, and that unbelievably cute person you are dating. Take the hint. And here's the deal: Forget that this task of planet-saving is not possible in the time required. Don't be put off by people who know what is not possible. Do what needs to be done, and check to see if it was impossible only after you are done. When asked if I am pessimistic or optimistic about the future, my answer is always the same: If you look at the science about what is happening on earth and aren't pessimistic, you don't understand data. But if you meet the people who are working to restore this earth and the lives of the poor, and you aren't optimistic, you haven't got a pulse. What I see everywhere in the world are ordinary people willing to confront despair, power, and incalculable odds in order to restore some semblance of grace, justice, and beauty to this world. The poet Adrienne Rich wrote, "So much has been destroyed I have cast my lot with those who, age after age, perversely, with no extraordinary power, reconstitute the world." There could be no better description. Humanity is coalescing. It is reconstituting the world, and the action is taking place in schoolrooms, farms, jungles, villages, campuses, companies, refuge camps, deserts, fisheries, and slums. You join a multitude of caring people. No one knows how many groups and organizations are working on the most salient issues of our day: climate change, poverty, deforestation, peace, water, hunger, conservation, human rights, and more. This is the largest movement the world has ever seen. Rather than control, it seeks connection. Rather than dominance, it strives to disperse concentrations of power. Like Mercy Corps, it works behind the scenes and gets the job done. Large as it is, no one knows the true size of this movement. It provides hope, support, and meaning to billions of people in the world. Its clout resides in idea, not in force. It is made up of teachers, children, peasants, businesspeople, rappers, organic farmers, nuns, artists, government workers, fisherfolk, engineers, students, incorrigible writers, weeping Muslims, concerned mothers, poets, doctors without borders, grieving Christians, street musicians, the President of the United States of America, and as the writer David James Duncan would say, the Creator, the One who loves us all in such a huge way. There is a rabbinical teaching that says if the world is ending and the Messiah arrives, first plant a tree, and then see if the story is true. Inspiration is not garnered from the litanies of what may befall us; it resides in humanity's willingness to restore, redress, reform, rebuild, recover, reimagine, and reconsider. ... Ralph Waldo Emerson once asked what we would do if the stars only came out once every thousand years. No one would sleep that night, of course. The world would become religious overnight. We would be ecstatic, delirious, made rapturous by the glory of God. Instead the stars come out every night, and we watch television. This extraordinary time when we are globally aware of each other and the multiple dangers that threaten civilization has never happened, not in a thousand years, not in ten thousand years. Each of us is as complex and beautiful as all the stars in the universe. We have done great things and we have gone way off course in terms of honoring creation. You are graduating to the most amazing, challenging, stupefying challenge ever bequested to any generation. The generations before you failed. They didn't stay up all night. They got distracted and lost sight of the fact that life is a miracle every moment of your existence. Nature beckons you to be on her side. You couldn't ask for a better boss. The most unrealistic person in the world is the cynic, not the dreamer. Hopefulness only makes sense when it doesn't make sense to be hopeful. This is your century. Take it and run as if your life depends on it. (05/24/09)

The End Game Draws Nigh

John Mauldin writes: Nearly everyone I talk with has the sense that we are at some critical point in our economic and national paths, not just in the US but in the world. One path will lead us back to relative growth and another set of choices leads us down a path which will put a very real drag on economic growth and recovery. For most of us, there is very little we can do (besides vote and lobby) about the actual choices. What we can do is adjust our personal portfolios to be synchronized with the direction of the economy. The question is "What will that direction be?" Today we are going to look at what I think is a very clear roadmap given to us by Dr. Woody Brock, the head of Strategic Economic Decisions and one of the smartest analysts I have come in contact with over the years. This week's Outside the Box is his recent essay, "The End Games Draws Nigh." For those who have the contacts in government, I urge you to put this piece into the correct hands so that Woody's very distinct message gets out. I think this is one of the most important Outside the Box letters I have sent out. Woody normally does not allow his work to go beyond the circles of his clients, but I suggested to him that this piece was quite macro in scope and important for both individuals and policy makers everywhere to understand. In my own simple terms, trees cannot grow in some unlimited manner to the sky. Families cannot grow debt without limit beyond the growth of their incomes. And countries have the same constraints. While growth of debt in the short term is viable, growth of debt faster than the growth of GDP is not viable over the long run. This is not debatable. It is a simple fact. Therefore, as Woody says, it is important that you get the growth side of the equation right as you increase the debt side. Without the proper balance, you are heading for disaster. From his intro: "We weave these three concepts together so as to make possible an extension and generalization of "macroeconomic policy" as normally understood. Central to this extension is the need for policies that drive down the nation's Debt-to-GDP Ratio over time. Accordingly, we identify 15 policies that jointly reduce the growth of federal debt and increase the growth of GDP over time. Doing so not only points to a new set of policies for exiting today's quagmire, but also permits an appraisal of the Obama administration's current policy proposals. Regrettably these proposals do not fare well with respect to growth. Furthermore, the extension of macroeconomics we propose applies not only to the US economy, but to most all others as well. It should thus be of interest to readers everywhere." This is longer than the usual Outside the Box, and will require you to put on your thinking cap. But you need to digest this, and especially the conclusions. But it is very important that you understand the principles and concepts Woody discusses. We are at a very critical juncture, and the paths we choose will have profound impacts on our lives and fortunes. I cannot overemphasize the point. If we choose a path of growing debt faster than we can grow GDP, the negative implications for many traditional asset classes are enormous. (05/20/09)

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