The First Death Rattle of Our Unsustainable Economy
Last week's gyrations on Wall Street come as little surprise to most folks who have taken a critical eye towards our economic system. What you are seeing is the first death rattle of our truly unsustainable economy. We've been told for a long time that our way of life is unsustainable, which, we hate to point out, means that it cannot be sustained. To rephrase, it must end sometime! And that's precisely what is happening.
At the root of the financial debacle is the housing slump, which has a variety of causes. Primary among them is the fact that many lower and middle income folks are cash-strapped and can't make their mortgage payments, especially as adjustable interest rates rise. Many of the homes sold to subprime lenders were new constructions built out in the boondocks, where the only available transportation is the automobile. As gas prices rose, these mortgage payments became that much more untenable. And gas prices rose because oil supplies have plateaued, having barely budged in the last four years. Even as supplies stagnated, demand in China, India, Russia, and Middle East has been growing at 5% to 10% a year, meaning less and less for us each year.
Neoclassical economics, which is the philosophical underpinning of our financial system, did a decent job of describing what was going on in the world when access to supplies of raw materials were generally increasing. It is a philosophy of continual and never-ending growth. Unfortunately, when access to materials begins to become constrained, the multitude of inherent contradictions rises to the surface like the bloated carcass of a whale.
A perusal of a few of the most obvious fallacies should prove enlightening.
Just as we would look askance at a mother who believes her child will grow forever, or a gardener who believes their tomato plant will one day reach the heavens, the sanity of the economist who believes the economy can grow forever must be similarly suspect. Infinite growth is not possible in a finite world! Remember, it must end sometime!
Likewise, the idea that neoclassical economics (also referred to as capitalism) is the most efficient economic system is complete and utter malarkey. What is efficient about everyone owning a car that they only use an hour or two a day? Or a lawnmower they use for thirty minutes once every two weeks? Or a tiller they might use once a year? Not only do these things have to be made from the finite materials of the earth, but people have to work in order to build them and afford them. From a resource use point of view, sharing is vastly more efficient than individual ownership.
Capitalism is efficient at taking resources and converting these into a product, and then selling us this product whether we want it or not. What it does not take into consideration is that there might be any ill effect from the energy used, the waste created, the limits of raw materials, or whether the ownership of that product will in fact make us the slightest bit more content. Other than that, it's perfect!
Capitalism is also considered to be fair, supposedly because it allows for anyone to drag themselves up by their bootstraps and become loaded up on material goods. This concept is suspect beyond the fact that we taxpayers are again being called upon to bail out the risky financial decisions of the elite on Wall Street. Since neoclassical economics embraces the concept of limitless resources, philosophically it can support the idea of individuals owning as much stuff as he or she may so desire, since there will always be more for everyone else. But as we finally accept the idea of a finite world, this notion goes out the window. Owning and consuming as much as you like means others must go without! Spend some time trying to reconcile your egalitarian underpinnings with the idea that we have a right to consume as much as we please in a finite world. Let us know if you figure that one out.
Unfortunately, for the time being we have an economic system based on these fallacies. How do we get from here to a sustainable and egalitarian economic system? We must ask these questions of those claiming to be our leaders, and those who wish to replace them. Our times call for nothing less. Unfortunately, there has not as yet been any serious talk of how to implement a sustainable economic system. In our next post, we'll look at some of the philosophical concepts that would underpin such a regenerative economy.
Stephen and Rebekah Hren are the authors of The Carbon-Free Home: 36 Remodeling Projects to Help Kick the Fossil-Fuel Habit from Chelsea Green. For more information about green living, the Hrens, or their book, visit chelseagreen.com.
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The winds of change are often mistaken for Chein-Stokes breathing, aka death rattle, by the inexperienced. Stick around, the patient [capitalism] may live. Capitalists have a large number of survival skills; they are always glad to learn more [newer] survival skills.
You try to propagate the lie that America is capitalistic. We have been sliding Socialist for a century plus. Every slip has made it worse. Big business in America is merchantilist or National Socialist at best. Small business is the only place you see capitalism in America
Amazing to see in reverse the health of the Chinese economic sectors practicing capitalism. Yet you are the same folk who complain about jobs going to China. China allows a little capitalism and 300 million people are pulled out of poverty. But, you don't want people pulled out of poverty via jobs, you want it to be through government controlled handouts to keep them dependent upon the state.
The party could continue if only the Chinese government is willing to continue lending us money .... $700 billion this time. The problem is the Chinese have the money and we don't. Also the Chinese will not want to buy another $700 billion T Bills and neither would I.
The root cause of our economic crash is because the bad trade deals moved our jobs and factories to China. That is why we must depend on China to buy the T Bills. Any true solution to the financial crisis must include mandating balanced trade. This means the WTO China deal must be altered or else China must buy as much from the US as we buy from them. The only way this will occur is Tarrifs on non-balanced imports from countries that do not actively support our international efforts.
Balance trade or die
Sounds very racist against Chinese? Why don't you want Chinese to have jobs?
much of the problem with our current faux-capitalism is that people have been CHEATING by externalizing the vast majority of the true costs of their activities onto taxpayers, society and the environment. if REAL costs were attached to all products, we would have living wages, very little pollution, no waste, and a generally sustainable financial and environmental system.
i have argued this 50 times on this blog - our trade agreements, in which we have MASSIVE leverage, should all require (and enforce) living wages, fair labor laws and clean environmental practices. this would eliminate the trade deficits, raise the standard of living for all our trading partners, and slow consumption to where it makes sense. our own society would also need to meet these basic requirements, and we would start to see which products and services REALLY were worth what they cost. most would simply go away.
what we have now is a pyramid scheme, with both an ever-expanding need for "The Exploited" (workers, natural resources, the environment) and an ever-expanding need for "New Consumers" (usually poor people who are then forced into working for money to consume goods they didn't need before). we can't keep it up, so we are either going to get WAY worse, fast, or we are going to level the playing field. what's it gonna be?
Have you lived in those "exploited" countries? You have been reading too much of your own propaganda. 95% of those jobs do provide living wages, much better than they had before. Half the people make enough wages that they send extra home to help their relatives.
The people in those countries ask, why do Americans want to take away our jobs and our pride in working, yet they remove the pride of people in America by welfare. "Is a job better or a hand out better for the person"?
'It must end sometime! And that's precisely what is happening.'
I agree that it must end but that's not what's happening now. BushCo. has blackmailed the country to keep the (unsustainable) party going, financed by $1 trillion in taxpayer money.
As we are witnessing in the current crisis, the political ramifications of a 'free market' distribution of wealth and power should also be factored in.
Concentration of wealth and power in a few individuals and corporations begs the question of how they might undemocratically use their position to further advantage( deregulation, media manipulation, union busting, etc).
Another 'sociological', if you will, factor is the way that corporate organization and operation is inherently anti-democratic. They are organized in a hierachy, and operate in an authoritarian and secretive manner. Much like a cyborg Terminator, they singlemindedly pursue the profit goal, dismissive of actual human cost.
Finally, to put it bluntly, capitalism's rise has been coincident with the rape and pillage of the planet. Environmental concerns are also dismissed as secondary to immediate profit. And worse, privatizing natural resources, and access to natural resources has been a proven way to extract and extort profits. It is also a reason to have and use military might (both to monopolize resources and force consumption of goods, e.g. the Opium Wars).
Economics may always be murky but human nature is sometimes crystal clear. Socialism (or as the Hren's call it, "sharing") has failed miserably everywhere it has been tried. Capitalism has its flaws but the alternative is worse. Just ask any Cuban or North Korean (assuming they were allowed to speak before being thrown in jail or shot).
Doesn't have to be either or. We need a nationalized health care system -- like everyone else in the world.
And how come we all have to "share" with the bankers, who make out like bandits with their multi million parachutes? Socialism for the rich is o.k. by you?
I'm not advocating socialism, but your argument confuses socialism with authoritarian government.
While many socialist countries are indeed authoritarian (Cuba, North Korea) there have been capitalist authoritarian governments as well. Quite a few people got shot in Pinochet's Chile or Franco's Spain.
Likewise nobody's getting shot in Sweden.
If socialism is so inefficient, why is the Euro kicking the dollars a$$?
malthus.
like duh!
d
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