Sunday 15 September 2013

Money vs. reality

I've just listened to James Howard Kunstler's latest podcast[1], an interview with "ecological economist" Eric Zencey, whose book “The Other Road To Serfdom”[2]came out late last year. I give below a loose summation and interpretation of what I saw as the main points.

Zencey gives a good definition of sustainability: a system that doesn’t undermine the preconditions of its existence. (I recall a TV programme about farming in Norfolk, where thanks to centuries of intensive arable agriculture and other erosion factors the soil level had dropped so much that an old farm house had to have extra steps added, to let the occupants get up to its front door.)
He says that money is not always a good measure of what is going on, or what is beneficial, in an economy. Money is an abstraction, like a mathematical model, and reality is the energy and matter of the Earth, which we transform to suit ourselves. When fiat money is essentially infinite, but the world is finite, there is the potential for dangerous modelling distortions that will lead to seriously incorrect choices. Zencey like the idea of increasing bank reserve requirements until we get “100% money” (but I fear that might cause a depression that would result in a backlash that casts off all restraint).

GDP is flawed: it measures what he calls the “general commotion of money”, but it has no column for debits. (This reminds me of a presentation I heard at the BAAS[3]in Birmingham in 1977, where an economist noted that eating more sweets and going more often to the dentist both raised GDP. ) Real growth, in the sense of more net benefit to us, is not the same as increased activity. So he calls for the adoption of an alternative yardstick, the Genuine Progress Indicator.[4]
Zencey suggests that instead of the classical –theory tripartite division of economy into land, labour and capital, we should consider four classes of resource or capital: the built infrastructure, plus natural, social and cultural capital. (I emailed Mr Kunstler last month to say that the prospects for the US are still good, since the ratio of population to arable land is higher than anywhere else except Russia. He agreed, but said in effect that US culture has degraded and the infrastructure has seriously weakened, so that Americans are not the same people they were in 1943.)

Our current rate of consumption of “natural capital” is several planets’ worth; we will, he says, eventually get a sustainable system, it’s just a question of what kind, and so our task is to give future generations as many options as possible. The world is not infinite, and our current agricultural system “turns oil into people”. When the oil runs out (and like many other commentators he scorns the “100 years of shale” story) we’re back to the natural resources of 1800 (when the world fed maybe a billion humans) plus whatever modern technology we can employ to make best use of them. Perhaps a sustainable human population of 2 or 3 billion?
Current economic measures generally don’t factor-in ecological degradation, but Zencey notes that the Failed States Index[5]includes an element for demographic pressure on resources. (And not just local-demographic, I’d say, if we think about what’s happened in the Middle East.) One of his chapters is provocatively entitled “Got terrorism? Blame economists”.

But he agrees with Kunstler that the young, much-maligned Millennial generation are hopeful, care, are passionate to use their knowledge to engage with the challenges we’re leaving them.


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