Saturday, December 10, 2011

The Myth of Growth

What Does "Fixing" the Economy Mean?

Anyone who has heard anyone reporting on the US economy has heard a "common theme" running through the stories.  To validate any of the media's myriad forms of economic fear mongering, we find a common thread:  growth.  Gosh, if we just had more economic growth, every possible aspect of the economy would be all fixed up in nothing flat!

We might pause for just a moment here, delaying our descent into the actual economic growth issue --  remember, we've been told growth is everything -- to discuss what is meant by "common theme."  And, exploiting one of MeanMesa's "tried and true" big picture literary gimmicks, we shall explore this "common theme" from the unquestionably objective point of view of an alien race observing the situation from a carefully sequestered space ship in orbit above us.

An Alien View of the Planetary Economy

After analysing all the media traffic about how bad things are, our thoughtful aliens, all very well respected members of IHOPPPES [the "InterPlanetary Harmonious Office for Primitive Planetary Populations Economic Subcommittee"] immediately held a large conference of all the most highly esteemed, most experienced, very "top line," best thinkers among them.  The conclusion of this scholarly, orbital symposium was that it would be necessary, as a first step, to carefully form a conjecture of exactly what this planetary economy would be like if it were not the "worst possible thing since the Great Depression."

The orbital IHOPPPES conference. (image source)
That is, "If what was being observed was how the economy should not run, what would be observed if the economy were running the way it was intended to run?"

Being the product of advanced cultures from each of their respective advanced home planets, the subcommittee members were not at all misled by the flurry of "supply side" solutions being suggested by those in charge of the disaster on the Earth below.  Everyone unanimously agreed, right off the bat, that what they were seeing was definitely a "demand side" problem.

Further, the Subcommittee quickly "sized up" the basics of the planetary economy which had now begun failing so miserably.

In its normal state, the parameters of the system were clear to them.  Human babies were created at a rate which more than compensated for the planetary death rate.  These babies were then nurtured into a predictable adulthood at which point, each of them would begin to work for "discretionary money" which could then be spent to create the demand required to sustain the planet's economy.

However, this particular planet had imposed an unusual "extra burden" on the very most basic idea of what "sustaining the economy" meant.  This was the commonly held infatuation with "growth."  In order to "sustain" itself, the planetary economy had to perpetually grow larger and larger.

In fact, every media story about "what's wrong with the economy" relentlessly presented this very issue, that is, the "growth" issue, as "the burning question of the day." 

Having supplied themselves with this very comfortable and very available idea of limitless growth as an absolute necessity for their economy, the Earth humans very naturally looked at this foolish idea as the only possible way to ever possibly get their planet's economy "on the right track" again.

Although the economic mess had completely dumbfounded the Earth's planetary economic experts, the immediate solution was clear to the more technologically advanced members of the IHOPPPES council.  Literally only a few minutes later, all agreed that the simplest, most trustworthy solution would be to increase the rate at which babies were being produced on the planet below.

To this end, the IHOPPPES High Committee authorized the space ship's captain to saturate the entire surface of the Earth planet with the ship's FEAR system [the "Fecundity Enhancement Assistance Ray"].  At once, enjoying the "enhanced fecundity" of the ray's influence, millions and millions of "extra" babies would be born to happy couples all around this troubled world, each birth bringing with it a tiny part of the necessary increase to the economic "demand" side of the equation, and, in this way, completely correcting the planet's "demand side" deficit.

In the council chamber a great feeling of well deserved "pride of accomplishment" flooded every member present.  The council chairman, in fact, ordered the ships galley to prepare a special celebratory feast of the intergalactically famous IHOPPPES strawberry pancakes, each one drenched with the very best, very pure Vermont Maple Syrup for every member present.

As the great space ship departed Earth orbit for its next economic recovery mission, spirits were high after another, such highly satisfying, successful intervention.  All the diverse aliens in the council "high fived" each other and sang "See?  Everybody wins!"

A Cooler, Colder Look at "Growth"

If we continue to look at the present economic calamity with more realistic eyes, we see countries all around the world now horrified that they have "suffocated" growth with too much debt.  Although at the "first taste" this proposition just "glides" down one's throat like a bite of a strawberry pancake drenched in Vermont maple syrup, a closer scrutiny begins to reveal some unsettling facts.

Perhaps there is, after all,  a "Vermont guppy" in the batter.

In theory, any Earth bound nation will unavoidably enjoy a certain level of "investment surplus" emerging from the work and products of its economy.  It is precisely this "investment surplus" which will, when properly applied, result in the gradual refinement and growth of improving conditions in such a nation's conditions of life.

Considering such a system as the rational approach for a country's efforts to gradually improve its condition, just where does all this debt enter the picture?  Why borrow money to accomplish those things which such a system will otherwise gradually accomplish anyway?  That is, gradually accomplish in a more "organic" manner, one which is financed by the "investment surplus" at a realistic rate rather than by borrowing?

At a "realistic rate" which can be sustained without borrowing?

The answer to such questions is sickeningly simple: "cultural and political impatience."  The gradual application of a country's organic investment surplus, at least in modern times, does not meet the popular speed commonly desired for  improving conditions.

For this reason, often called the "growth requirements" of a social culture for such improvements, economies find themselves needing to borrow money to finance critical projects such as roads, schools, hospitals and the like.  However, this borrowed money is often diverted to what are painted as day to day expenses and used "to make ends meet."

Of course, all this borrowing may be often be disguised as nothing more than a national version of a local "bond issue," but there seems to be an avoidable problem which always "crops up" as such programs unfold.  The problem arises from the fact that borrowing money is much more politically popular in most countries than raising taxes -- much more popular -- regardless of the story that goes with the explanation of why the money must be borrowed.

Naturally, the organic surplus can be overwhelmed by sudden expenses such as tsunamis, wars and other catastrophes.  In such cases, borrowing often determines whether a state will survive what confronts it.  In such cases economies cannot otherwise meet the cash requirements necessary.  Also, in such cases, the population whose name is "placed on the note" is usually quite aware of why the borrowing took place and in strong agreement with it.

When Debt Becomes Goliath

Such practices, in more stable economic times, disappear below the radar with the folks whose names are on the note.  The visible reality of social improvements -- again, schools, bridges, sewer plants and the like -- are normally enough to placate even the stodgiest conservatives among such voters.  In many cases, good arguments had been made that the new bridge to Shelbyville would benefit the local economy -- and it turns out that it did.

However, absent the war and tsunami case and floating far above the local "bridge bond" sale, we find borrowing practices which are best left far from the light of day.  Throughout all of this misery, the excuses for the terrifying, accumulated debt remain the same:  slow growth and too much spending.

The facts, however, cast a condemning shadow of these reasons.  It is usually the case that no reasonably possible rate of growth would have met the expectations accompanying the decision to borrow.  Further, the spending cuts seem to be targeting areas quite disassociated with the debt they supposedly address.  And, finally, there are no new bridges, water plants or school repairs -- just debt.

The "Meth Addict" Economy

When a nation desires to "consume the future" at a rate which is "faster than the actual passage of time," all sorts of undesirable consequences are "just around the corner."

Not only is there a sudden flow of money which is not yet produced, the spending of that "future money" grows sloppy.  Tax payers are, generally, quite interested in the spending of their tax money, but they may be somewhat less interested in the spending of money borrowed on their signature but based on future prosperity rather than current resources -- resources which would have, otherwise, appeared in their grocery carts or on their kitchen tables.

The infatuation with "growth" introduces an unusual irony.  From the mouths of these tax paying voters we hear a constant reluctance to "bathe their children in debt," but from the spending policies of the officials they continually to elect, the message is a polar opposite.

Theoretically, all this "extra meth" would work out just fine, but that theory is one fundamentally based on the prospect of a faster and faster monetary velocity through an ever growing economic pie.  Economists forgive the world's population for its incessant expansion, but they apparently do not consider the possibility of a limit to the size of the world's economy.

We're leaving out the forthright looting which usually accompanies the application of borrowed money to "specially designed projects" and other expenditures which seem to perpetually line the pockets of the policy makers who propose them.  The fleeting euphoria of our new bridge blinds us from any moment of clarity with respect to limits which should have been imposed on our borrowing rate.

Further, our creditors, like meth dealers, are gleefully uninterested in any discussion of rational limits.  They live in a world where the single question is "Can they pay?"

The unhappy, end result is that every dollar spent on such "special projects" is devalued by its interest because it is a borrowed dollar.  The price of every program is automatically increased by the interest rate of the money borrowed to create it.

We quit "getting our money's worth" long ago in favor of "getting our money's worth. less interest and looting."

"Good" Versus "Growing"

Through the years of manipulating our economy toward an unceasing state of growth, we have neglected what is, perhaps, an even more important question.  Even our language betrays our thoughts.

 Of course we can keep it up!  

We just have to keep GROWING!

An exaggeration?

How often we have heard ourselves speak of "better times" for our children, and how infrequently we have heard ourselves speak of "good times" for our children?  Do we really think that there is no limit on how much "better" things will get?  Especially with thoughts mature enough to understand that the economic "system" within which we live has, wait for it, limits?

Even though we have essentially ceased spending money on infrastructure in favor of financial gizmos, we have also quit worrying about any possible, upper limit on our planet's economy no matter how many hydroelectric dams, hospitals and highways we might ultimately build across the planet in hopes of reaching the "Star Trek" dream world.

The lament of the environmentalists  has been focused on the physical capacity of the planet to support our habits, but those well reasoned cautions have largely omitted the raw economic correlate.  Inebriated with the myth of perpetual growth, we have never subjected our synthetic optimism to such a test.

The herald of our future calls us to reconsider our incomplete fantasy of possible, ultimate future states.  We will need to have more thoughts about a "good" economy to replace our now unstoppable visits to the "dealer" for a "growing" economy.

Researchers on the topic of meth addiction have adopted a chilling terminology: "anhedonistic."  In their definition the state presents when all the pleasure hormone, dopamine, has been consumed, leaving the addict without any prospect of his normal, hormonal sponsorship of pleasure of any sort.  From such a low point, his future ambition becomes limited to pain reduction, not the blissful euphoria which had been possible earlier.

We can increase our "borrowing load" to a similar place as we frightfully pursue our insatiable appetite for growth without limit.  As we "consume our future" at an ever increasing rate, the actual, material productivity of the money we borrow dwindles precipitously until the advancements we dreamed of making are finally converted entirely to interest payments with a "little bit" left aside for the looters.

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