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A Silver Lining to the Economic Downturn


An alternative to panicking when GDP stops growing is to view it as a sign of maturity.

Human activity cannot expand forever on our finite planet. An economy growing at 3% a year doubles its size every 24 years. Centuries of such growth have brought us to a mature size. As with individual maturity, there comes a time for societies to stop growing, recognize their power and take responsibly for their impacts.

As a mature species, we have two responsibilities to Earth and ultimately, to ourselves. The first is to live within the availability of natural resources. Global production of oil has stalled for three years at about 85 million barrels a day, yet demand continues to increase. (Presently reduced by about 5 million bpd due to recession) This results in rising prices. The increased cost is reminding us all about how dependent we are on this particular resource.

While fossil fuels are a well-known resource issue, there is also cause for concern with fresh water, forests, fish, soil fertility and other resources.

Our second responsibility is to keep our waste within tolerable bounds. Climate change is a direct result of human activity having grown to where our C02 emissions are overwhelming the ability of oceans and forests to absorb it, leaving it to accumulate in the atmosphere. What is the logic of policies aimed at doubling our size, when current activities, at the present population level, have already brought us to the edge of climate chaos?

Climate change is not the only issue related to tolerance. Respiratory problems, many cancers and other illnesses, which result from the accumulation of manufactured toxins, are also wake up calls.

The sub-prime mortgage crisis rivals the price of fuel and climate change in terms of public concern. It too can be linked to confrontation with planetary limits.

Over the centuries, the expansion of our growth-dependent type of monetary system has inflated it to gargantuan proportions. In North America, to accomplish 3% growth, over four hundred billion dollars in new business has to take place in the present year. This is over and above the fifteen trillion dollars worth of transactions already taking place. Large amounts of new money has to be loaned into existence to accommodate this expansion.

Before humans filled the Earth, there were areas of untapped natural resources, from which we could produce things of tangible value that people were willing and able to pay for - businesses, houses, tools, food and the like - to back up an exponentially expanding money supply. By the 1980s, it was becoming increasingly difficult to produce enough real wealth to do the job. Following "junk bonds," and the DotCom bubble, bidding up real estate became a primary means for expanding the money supply. When that bubble threatened to burst after 9/11, interest rates were dropped to almost nothing and mortgages were offered to people with no down payments and little credit worthiness. At hundreds of thousands of dollars each, great quantities of money were loaned into circulation. It appeared to work, until energy driven inflation prompted interest rate increases that many sub-prime mortgage holders were unable to pay.

These problems indicate that the time has come for a fundamental change. Fuel prices, climate change and the sub-prime mortgage crisis are all symptoms of one cause. They will not effectively be resolved until the fact that human activity has grown to stretch planetary limits is addressed. We cannot grow out of problems that result from our size.

When we stopped growing as individuals, it was not the end of the world. Indeed, for most of us, life had scarcely begun before physical maturity. Even as physical growth ended, we became better informed, more comfortable in ourselves and we developed the skills and relationships that define our lives. The same can be true for civilization.

Among the first things societies can do, as we acknowledge our maturity, is to shift investment into education and health care. Unlike cars and expanding highway networks, which are resource and waste intensive, education and health care (particularly care at the preventative level) consist almost entirely of knowledge and good will.

Another step will be to revive local, small-scale agriculture. Food produced in this way requires less fuel and other natural resources and has been shown to produce more food per acre, of a higher nutritional quality, than industrial scale farming.

Investing in education, health care and local food security makes sense, if what we want is a healthy, well fed, educated population. With the present commitment to make money grow, however, such goals appear self-serving. Our advanced size requires that all our efforts be focused on monetary expansion.

Do we want to grow money or food? As long as our goal is defined as making the GDP grow, efficiency will be measured entirely in terms of what makes the most money. Even though industrial agriculture produces less food per acre, than small-scale local framing, it does produce a greater crop of investment capital. Money borrowed for heavy equipment, fuel, pesticides and fertilizer earns interest and, driven by payment schedules, stimulates efforts to maximize financial return. Local farming, on the other hand, contributes relatively little to the immediate need of expanding capital. It tends to put money into the pockets of farmers who, rather than investing it, are more likely to buy food, shelter and education for their children.

When industrialization began, it was recognized that mechanized, mass production could provide products at a fraction of the cost of hand-made goods. The main obstacle to applying the industrial process to all manner of goods was a shortage of capital. Because it costs a lot of up-front money to build an industry, our system of mutual provision (the economy) was designed to encourage the expansion of capital. However, now that the world is awash in so much capital that, a continuous stream of speculative bubbles is necessary to give it places to invest, it is time for another goal.

As we mature as a society, the things that indicate well-being change. Measuring how much a baby grows is a good measure of its health; it is not an effective way to measure the well-being of an adult. If we want to resolve today's multiple crises, we need more detailed information.

At present, if there is a natural disaster, toxic spill or a health epidemic, the costs of dealing with the problems are added to the GDP, giving the false impression that we are better off. While more money might be flowing, life is degraded by such things. If we were to measure social and environmental factors of well-being with the same authority and enthusiasm with which we measure GDP, much of the confusion would be avoided. A Genuine Progress Index (GPI) would provide a broader spectrum of information, enabling the costs and benefits of different activities to be assessed with greater accuracy. Along with the traditional economic indicators, accounts about air quality and health issues, for example, would reveal that the hundreds of millions of dollars spent annually on medicine to relieve respiratory suffering is more a sign of distress than of economic progress.

A legitimized indicator that shows whether social and environmental factors are improving or deteriorating would create the awareness needed to stimulate serious actions toward solving the problems.

By identifying resource draw-down, pollution, and disruptions to communities, with a GPI, external factors would enter the picture. (External factors are things associated with an activity that don't appear in the accounts of that activity, like the use of air, water and soil, the release of pollution and impacts on people and other life forms.) Presently externalized costs are not included in the price of goods. When such costs are added to production costs, those goods that are socially and environmentally friendly would be less expensive and those that cause problems would cost more. Both consumers and producers would then be inclined toward responsible products.

Taking the additional step of shifting the skill, ingenuity and persuasive effort that is presently applied toward engineering obsolescence, and, instead, using it to design durable, easily repaired goods, and to reclaim pride in objects that have long served us, could cut up to 50% off of our material and energy consumption and consequent impacts.

One final shift - from looking for fulfillment in material goods, to seeking it in friendships, knowledge, appreciation, service, music, art, sport and adventure - would complete the transformation. Coupled with environmentally responsible agriculture, such a change could reduce our impacts to practically nothing. That is, the real costs of maintaining well-being for humans, in terms of the ability of Earth to sustain life over time, would be negligible.

By finding satisfaction in the richness of being human, we could change the nature of our species from that of a potentially terminal blight spreading over the Earth, to something much more suiting to our position amidst other living things. As a mature species, we could reward three billion years of evolution by adding laughter, love, awe and wonder to a deep appreciation for the incredible accomplishments by which life has brought us to this point.

While arguments persist about oil supplies, climate change and the possibility of perpetual economic expansion, we are well advised to acknowledge the ultimate finiteness of Earth and accept responsibility. Policies intent on expanding until the last possible moment will almost certainly be followed by disaster.

Human ingenuity is more than sufficient to provide food, shelter and other necessities without having to double the total of all our activities every 24 years. It is a Question of Direction. We need to choose between the goal of perpetual growth and that of long-term well-being.

We celebrate when our children grow. If an adult continues to grow like a child, however, it is cause for serious concern. Developing a healthy steady-state economy is no more frightening than the prospect of becoming adult is for a teenager. The silver lining to this economic downturn is the opportunity it offers to grow up and take responsibility for our impacts. It can be done. Mike Nickerson is the author of "Life, Money & Illusion; Living on Earth as if we want to stay"

More detail on how a "Genuine Progress Index" (GPI) works available here