Thursday, February 24, 2011

The persistent myth of economic growth

Development in understanding in recent years is making real limits on growth a lot more palpable since it is becoming quite evident that our approach to measuring economic value and the costs of acquiring said "value" (i.e. our monetary system) is woefully incomplete. Yet economic growth remains the be-all-end-all that pervades every aspect of human aspiration. Corporations scramble over one another to get into the next market to expand into. Shoppers are continually trawling vast malls looking for the next must have. Credit is wantonly extended to grease the entire endeavour.

Consider the resource water. We see water as a virtually "free" resource. Because we think of it as "free", we use copious amounts of it -- we flush drinkable grades of this resource down our toilets and use it to wash our cars. Our monetary system is good at counting the costs and benefits of piping massive volumes of water to people's homes -- to the point that many households take the idea of water bursting out of a tap at a quick twist of the wrist for granted (which is why we perceive it as "free"). But what the monetary system does not count is the environmental cost of this "efficiency" -- costs, we are finding out now, when accumulated past a critical point may tip the ecosystem into a state that results in this once abundant resource simply vanishing in the blink of an eye (relative to geological timescales) or gushing in in destructive quantities.

Little trinkets imported all the way from China are another one of those perceived "free" resources. They seem free (or cost next to nothing) because we've developed technologies and systems that enable us to take vast amounts of raw material from the Earth and turn these into vast quantities of "products" that can be sold for more money than the monetary cost of said raw materials. The monetary system tells us such activities are "profitable" and the consultants will use this "fact" to tell us these activities "add value". And because they are "profitable" and "add value", more people start enterprises that undertake similar activities. Governments note the additional "value" added by every new "profitable" activity started and extols this as economic growth.

The monetary system (and the human-centric "economy" that it measures in its sadly limited way) scores the efficiency and productivity of the pipeline of human enterprise that extracts Earthly resources and turns these into consumable products and services. What the monetary system does not account for is the cost to the Earth of the waste products generated by this pipeline and the degradation caused by extraction of raw input into this pipeline.

The monetary system that measures the performance of the human economy rewards development of humans' capability to acquire and accumulate and assumes an infinite capacity in the planet to support the means to acquire and accumulate.

So the concept of "generating wealth" (which increasingly seems to be a euphemism to mask a flawed assumption that economic growth is limitless) may no longer be a long-term option. The more pragmatic approach seems to be more around sustaining living standards for those who are already wealthy and hitting the brakes on escalating commitments for those who are still poor.

The concept of perpetually pursuing "growth" is a modern-day abomination created by an extremist free market system and, specifically, publicly-traded equity instruments driven by "investors" (or, more appropriately, parasitical equity traders) pursuing short-term "capital" gains. Unfettered population growth, "open" markets, and "deregulation" all contribute to lubricating and steepening the already slippery slope to the catastrophic collapse long ago foreseen by Jared Diamond in his seminal book Collapse. He makes this biting observation of a small cross-section of the fatal flaw in the concept of "globalisation" that is increasingly becoming evident but continuously swept under the rug...
It's really ironic that the British Empire was founded on exploiting poor, helpless third world countries by getting those countries to export their raw materials to Britain, who would then export back its finished products. Now let's think of the situation in modern Australia. Japan, the most forested country in the first world, is buying timber from the least forested country in the first world. They're buying it at very low prices, as woodchips, then it processes them in Japan, so the value increases by a hundred, and then Japan proceeds to export TV sets and cars back to Australia. Yet Australia is not some ignorant third world country. Why is [the government] so economically short-sighted as to export cheaply something that is in such desperately short supply here, so that they can buy their expensive TV sets and cars from Japan? It's as if the Japanese government were manipulating the Australian Prime Minister.

Big enough problems in the First World, think now of what this means to basketcase Third World countries like the Philippines. We continue to mask an obvious runaway addiction to locking ourselves into commitments we are inherently unable to honour by prostituting ourselves to foreign "investment" and deregulated foreign trade without a commensurate improvement in our ability to produce and sustain.


  1. Your commentary reminds me of my old query, when looking at the sheets of metal lining Los Angeles freeways during drive time, why don’t the drivers going east just swap jobs with the drivers going west? The freeways would clear up and everyone would be happier with shorter commutes. Alas, Australians took to the outback and shot dingos or headed for Bondi and surfed or hung ten at the opera house whilst Japan took to manufacturing.
    I personally think achievement is a good thing, for the spirit, and economic growth is a good thing, for the national belly, for there are always too many hungry and disenfranchised folks about, and competition is a good thing, for it promotes the brain as well as anything, and our brains would otherwise be more backward than they are now. The earth goes through stages, some better than others, and the accumulation of wealth for personal gain has characterized the motivation of many of us for centuries; it is a stage we would be wise to dispense with, as you say. Our motivation ought to be to think about how to extend our time on this finite orb, an orb that will not stand for an infinite number of fools blundering about stripping the place bare.
    Now, of course, the Philippines excels at stripping, having turned its lush seas to empty deserts, its verdant mountains to mud slides and too many of its beautiful women to mindless birthing machines.

  2. Thanks by the way. Our exchange of comments in the other article inspired this one. :-)

    That's the dilemma with being sentient beings, isn't it? Whereas other species were driven by a collective effort to propagate their genetic code, we as a species have become disengaged from that evolutionary driver because we can now consciously pursue individual aspirations.

    Trouble is, the macro effect of billions of individuals pursuing individual aspirations does not necessarily translate to a collective good or improved chances to endure for the species as a whole.

  3. I suppose Ayn Rand forgot to consider the small matter that too many egoists roaming the planet would eventually eat it all up.

    Our correspondence also caused me to reflect on how well educated we are in looking at the past, and how inept we are at planning for the future. I'll probably noodle up a blog on this point.


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