Amerika

Due to constant media bombardment, few can assemble a realistic assessment of economies. One side says that money is good and socialism is bad, and the other side says that consumption is bad and socialism is good. This benefits the inertia of the current system which wants no change and zero realism.

When confronted with paradoxical data, people tend to “walk it back” by reviewing historical data to find parallels to the current fact pattern. Most know or suspect that history repeats itself, especially as it concerns the boom and bust cycle that is present in all types of economies.

Based on that cycle, we can see that economics itself is not the main driver of the boom-bust cycle; instead, it must be created by resources or organization, or a combination thereof. While many studies have looked at resource limits, substantially fewer have looked at organizational limitations, life cycles, and failures.

The two sides differ again on human resources. While the population is growing, that is both a source of income and a limitation on economies, resources, and organizations. The more you grow, the more you have to be managed, and the resulting chaos disturbs organizations.

Consequently we have two groups, one that thinks we are nearing population crisis and the other that believes we need more people in order to keep our system going. The cyclical nature of economics and the human contradiction associated with it is a reminder of the widely-attributed analysis of mental health problems:

The definition of insanity is doing the same thing over and over again and expecting different results.

Dogma on the other hand consists of doing the same thing over and over again and not caring about the results, because the Narrative and its control powers are themselves the goal. However, we can all acknowledge that humans have been experiencing the same cycle over time in every civilization.

Economic cycles are influenced by this cycle. One suggestion made recently was that sovereign debt will intentionally cause the next downturn where the desired outcome will be a a no-growth economy:

Mill noted that increases in wealth were not boundless and questioned the value of unbridled industrial development. He argued that in a society with relatively stationary natural wealth, prudent restraint on population growth and “a system of legislation favoring equality of fortunes” would make possible broad pursuit of the “graces of life.”

One school, “degrowth” (or “décroissance”), arose in Europe, mainly since 2000. It recognizes that the planet’s resources are finite and sees reductions in the sizes of economies of developed nations as necessary. Degrowth largely rejects capitalism and associated cultural values related to growth. The movement came to include supporters from a variety of political and intellectual streams, streams that contain, collectively, an abundance of contradictions and cross-purposes. Many supporters of degrowth seek to live simplified lives. Discussions of ecological impacts of population growth are discouraged by some who argue that high per capita resource consumption of developed nations should be addressed instead. Leaders in development of degrowth include Joan Martinez-Alier and Serge Latouche. A paper by Federico DeMaria and colleagues provides an overview. Here is a website devoted to degrowth theories and proponents.

The second school, “steady state economics,” emerged in the United States led by economist Herman Daly, a former student of Georgescu-Rogen. The basic feature of a steady state economy is that the population and stock of physical wealth of a society are maintained at some finite, desirable, sustainable level. Turning on its head the usual assumption of most modern economic theories, Daly and the steady state economists note that human economies are subsystems of the planet’s ecosystems, and not vice-versa. As a result, economies are limited in scale by the abilities of ecosystems to generate material inputs to economies and provide sinks that accept wastes generated by economic activities. Steady state economics recognizes, à la Georgescu-Roegen, that stocks of many minerals of economic value are limited and that human activities are limited by energy available from minerals and the sun. But they also recognize that externalities associated with the use of limited resources (pollution, degradation of natural systems) can impose even harsher limits, reached often well before we exhaust minerals and the pent-up energy we derive from them. Market processes play a central role in steady state economics, though with tempering aimed at accomplishing or preserving broad features of the steady state system.

In other words, the great Communist and Green dream: low population, equal distribution of resources, no sudden growth based on consumer excitement over some product or another, and at the end of that, some way of limiting our impact on the planet by reducing our expectations to a part of but not all of Earth’s carrying capacity.

However, the broader question remains as to whether society can exist with a degrowth, stationary, or steady-state economy, and which we should choose. Reforming an economic system that mandates growth on a finite planet requires drastic changes in how we do business and the political system that supports our economies.

Some have channeled degrowth into an information science known as econophysics:

In the language of physics, relaxation time τ is a measure of the time needed by a system to reach equilibrium (“equilibrium” in a broad sense, not necessarily thermodynamic equilibrium). Mainstream economics assumes τ → 0 for internal adjustments of the economic system (hence, the standard use of general equilibrium models, which imply, for example, the impossibility of endogenous crises). The other extreme (τ → ∞) is often assumed in regard to the mutual adjustment between the system and its environment: key nonrenewable resources are never depleted (alternatively, depletion is considered possible but inconsequential), while climate change and other forms of environmental degradation never reach levels at which they interfere seriously with economic activity. Neither assumption has an empirical basis, and both have been defied.

Econophysics can be considered a branch of “complexity science” or “complex systems theory.” This is a transdisciplinary field with its main roots in physics (see, e.g., the popular account in [24]). Thanks to complexity science, physics moved beyond its traditional focus on extremely simple systems (e.g., balls or, for the case, rockets following a parabolic trajectory) and is applying its methods to more complex systems, which had been previously studied from other, complementary points of view, such as living beings, ecosystems, societies or the Earth system. Complexity scientists are especially interested in findings that are equally valid in several different fields.

A central concept of complex systems theory is “self-organization.” The meaning given in this context should not be confused with the use of the same expression in reference to grassroots-based social structures without hierarchy. In complex systems theory, self-organization consists of the generation of complexity without following prior designs or templates, whether or not the resulting complex structures involve some kind of hierarchy. A closely related concept is “emergent property”. This expression is used when a large set of interacting elements self-organizes, giving rise to a system whose properties could not be trivially deduced from the nature of the elements and their rules of interaction. For example, recessions have been a recurrent feature of capitalism, but there is no trivial way to explain their existence and features based on microeconomics; hence, recessions are an emergent property of capitalism. A key limitation of most utopian thinking to date is that, when considering the interaction among different agents, it has sought to design rules that are fair in themselves, i.e., on a small scale, expecting that they will also lead to a fair society on a larger scale, without studying the emergent properties that might arise out of these rules.

The resulting “ecological econophysics” is tainted by the fact that it was invented to argue for a goal: the development of democratically-based policies to reduce economic throughput to an environmentally sustainable level without triggering economic crises or excluding part of the world’s population, i.e., to implement degrowth.

We might replace “democratically-based” with “systemically-based,” since the future of democracy remains unclear. Instead of thinking in globalist terms with a one-size-fits-all approach, we can look toward a world of many different economies, some of which are growth economies while others are degrowth-based.

That however amounts to the usual socialist approach: take from the succeeding and give to the failing. That way, everyone ends up at a mediocre level of equal in the end, which is convenient for the bureaucracy in charge because this makes it safe from revolutions like the Jacobin or Bolshevik horrors of the last two centuries.

Others argue that growth is a moral mandate:

The rhetoric stems from the same flawed assumption animating all de-growthers: that the global economy is zero-sum, or that if one person or country gets wealthier, someone else, or the planet as a whole, is worse off.

Growth can make everyone better off. The reason economists are so obsessed with growth is not because we don’t care about the environment or equity but because we do. Richer countries have higher life expectancy, more leisure time, more female employment, lower infant mortality, and higher quality of life by pretty much every metric. Giving up on growth means dooming lower-income countries never to achieve these things.

In their view, as is typical of anti-Communist thinking, the point of free markets is to enable wealth which then trickles down to benefit the poor. It is hard to argue that in a country where even the poorest have air conditioning, healthcare, public education, and wide-screen televisions that this is incorrect.

Countering that are the people in the middle who we might describe as pro-Communist “neoconservatives” who wish to use socialism as a means of limiting growth so that economic equality may be achieved without full Communism:

But a coterie of heterodox right-of-center intellectuals has developed a newer synthesis. Borrowing insights from sources outside the traditional conservative canon, and using methods learned from earlier battles, these journalists, academics, and political operatives seek to break from the supposed right-wing consensus. They look not to overthrow the welfare state but to enact pragmatic reforms; they question whether the common good can flourish in a secular society; they attribute the cultural upheaval of the era to the influence of a managerial class of college-educated professionals; they decry the mutation of colorblind civil rights laws into a regime of racial patronage; and they worry that the virtues on which liberal societies depend have been undermined by the emancipation from traditional strictures that liberalism permits. One key figure in the movement, Irving Kristol, could bring himself to muster just two cheers for capitalism.

A more direct method of doing this, Half Earth, does not bother with the pro-Communist overtones but simply asks us to limit our resource use directly:

The Half-Earth proposal offers a solution commensurate with the magnitude of the problem: only by setting aside half the planet in reserve, or more, can we save the living part of the environment and achieve the stabilization required for our own survival. — E.O. Wilson (1929-2021)

This wisely ducks the question of what has caused our growth economies when the answer is most likely not capitalism but socialism adopted as part of our tax-and-spend “mixed economies”:

The circular Ponzi scheme long described by this site is a process by which liberal democracy funds itself based on demand for its currency. It takes the following form:

1. Government taxes its citizens who are above the poverty level, and promises to redistribute this wealth to people below the poverty level.
2. The impoverished then buy up consumer products, increasing economic activity.
3. Based on this demand, government makes borrowing easier.
4. Government then takes on more debt based on the collateral of this “thriving” Potemkin economy.
5. It uses this debt to distribute money to its impoverished citizens, and repeats the process.

Other People’s Money (OPM) is the currency of government social programs. They redistribute this income through wealth transfer in order to create a Potemkin economy where people are buying junk so that government can take out loans.

Perhaps, in other words, what we need for sustainable economies is not an end to capitalism, but an end to politically-directed growth that exists solely to fund our governments. Remove the high taxes, unions, regulations, affirmative action, and other subsidies and economies naturally become stable.

Coupling this with Half Earth could produce a neutral growth economy in which cycles of boom and bust occur within a smaller portion of the economy, limiting their effects, and therefore stopping the cycle of artificially stimulating growth which then leads to a depression as its momentum fades.

Right now, we are gamblers throwing our entire stack of winnings onto the table for each hand of poker. If instead we threw only a few percent of what we had in each game, the swings between winning and losing would be less catastrophic and balance each other out over time.

This mirrors what aristocrats did, which was to make land the most valuable economic resource but then to sequester most of that in tax-free aristocratic ownership, preserving green belts that existed until the most recent need for growth in housing to accommodate the growth in immigration into Europe.

Tags: capitalism, circular ponzi scheme, degrowth, economics, econophysics, growth, sustainability