10/24/2008 05:12 am ET | Updated May 25, 2011

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