A New Economic Model to Save the Planet

Plenitude: The New Economics of True Wealth

by Juliet Schor

Penguin Press (2010)

Book Review

The main premise of Plenitude is that neoclassical or free market economic theory falls short in addressing the global economic crisis because it fails to account for the negative ecological impacts (aka externalities*) of markets. The author Juliet Schor proposes a new economic model which addresses both environmental impacts and inequality.

Schor’s new “plenitude” model builds from ideas on downshifting and simplified living she introduced in her 1998 book The Overspent American. It’s based on four main principles.

The first involves a new allocation of time away from the market economy and a reduced reliance on money to meet individual needs. By Oct 2009, eight million jobs had disappeared in the US alone. There’s no way these jobs will ever be restored. However by reducing their hours of work (either voluntarily or involuntarily), people can make a conscious trade-off of money for time. With more time, households can increase their social networks and supports and find new ways (other than money) of procuring consumption goods.

The second principle involves diversifying away from the traditional economy by “self-provisioning,” growing and making things for ourselves instead of paying other people to do it. Schor sees distributed production facilitated by 3D printing** as a big part of this process.

The third principle is what Schor calls “true materialism,” an environmentally aware approach to consumption in which people are more aware of the ecological impact of their purchases. Rather than sacrificing a comfortable lifestyle, this might mean paying more for better quality clothes, shoes and consumer goods.

The fourth principle is restoring our investment in one another and our communities. Especially in times of crisis, these connections, sometimes referred to as social capital, are every bit as important as money or material goods.

Government Interventions Required

Despite numerous examples Schor gives of individuals, groups and cities that have already transitioned to the new model she proposes, new government policies will be essential to ensure the planet reduces its carbon footprint in time to avert ecological catastrophe.

Unlike French economist Thomas Piketty, author of the bestseller Capital in the 21st Century, she specifically opposes after-the-fact taxation to redistribute market income. She rightly points out that it fails to increase new wealth. Instead she would support a proposal put forward by Peter Barnes to set up a Sky Trust similar to the Alaska Permanent Fund. The Sky Trust would tax corporations on the carbon dioxide emissions (and possibly their destruction of habitat and discharge of toxic chemicals) and return the revenue earned as a dividend to citizens.

Secondly she calls for the adoption of social program (single payer health care, support for child care and tertiary education and reliable pensions) common in other industrial countries. She cites studies the common misperception that Americas work the longest hours in the world to acquire more consumer goods. The real reason they stick with jobs with impossible long hours and stress is because that’s the only way they can pay for health care, child care, college and a secure retirement.

Third she calls for a change in intellectual property laws to facilitate sharing new techniques and technologies) permaculture, agroforestry, biodynamic farming, cob, earthen and strawbale home construction, alternative technology, renewable energy systems) that enable more efficient use of resources.

Fourth she sees an essential government role in cleaning up toxic waterways and brownfields and restoring forests, which are also fundamental steps in restoring true wealth and reducing inequality.

Finally she would call on government to abandon their growth at all cost policies. She blames the financialization of the US economy for the pressure for constant growth. Although the sale of financial products produces no new wealth, it requires a continuous increase in economic growth to pay shareholders and bondholders.

Reigning in the Financial Sector

The main weakness of Plenitude is Schor’s failure to propose specific policies to reign in an out-of-control financial sector. In European parliaments, the main policies being explored include ending the ability of banks to create and control the money supply (restoring this function to government)*** and a financial transaction tax.****

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*In economics, an externality is a consequence of an industrial or commercial activity which affects other parties without this being reflected in market prices, such as rainforest destruction.
** 3-D printing is a manufacturing process that builds layers to create a three-dimensional solid object from a computer model. Video of houses being printed in China:

***See The IMF Proposal to Ban Banks from Issuing Money
**** A financial transaction tax is a levy placed on financial institution for specific types of monetary transactions.

Ecosystems, Cybernetics and the Club of Rome

All Watched Over By Machines of Loving Grace*

Adam Curtis

BBC (2011)

Part 2

Film Review

Part 2 in this series discusses how utopian ideas about computers led the scientific community to promote a totally erroneous model of natural ecosystems.

The term ecosystem was first defined by ecologist Arthur Tansley. He mistakenly believed that ecosystems work just like computers – that all of nature is linked through organized networks that self-regulate by means of feedback loops. As ecology became the predominant scientific discipline of the early seventies, he and his colleagues went so far as to portray these interconnected networks as electrical circuits. Meanwhile Silicon Valley computer engineers, heavily influenced by Ayn Rand’s radical individualism (earlier post), as well as this erroneous view of ecosystems, made a deliberate decision in 1968 to focus on personal computer technology rather than mainframe computers.

The work of Tansley and his colleagues would be totally discredited by new data that would emerge demonstrating were chaotic and unpredictable and tended towards wild fluctuations that never returned to an equilibrium point. Like many scientists, the early ecologists had oversimplified and distorted the data they collected to fit their model of nature as a self regulating system.

The Rise of Cybernetics

Meanwhile the scientific community’s fascination with computers would also give rise to the field of cybernetics, which looks at society as if human beings were a vast interconnected system of machines. Buckminster Fuller, inventor of the geodesic dome, was a strong proponent of this systems-oriented view of both nature and society. A strong egalitarian, Bucky envisioned a society (which he referred to as Spaceship Earth) that did away with authoritarian hierarchies and allowed people to live together as equal members of a closed system that would self-regulate – as a spacecraft does.

In the early seventies, disillusioned by the failure of the anti-Vietnam War, a half million young Americans left the cities to start experimental non-hierarchical communes in the countryside. It would be the largest mass migration in US history. Their goal was to create egalitarian communities in which people sacrificed their individuality for the benefit of the system.

Most of these communes would fail. Curtis blames their failure, without any real evidence, on a rigid absence of structure that allowed stronger and more dominant personalities to dominate and bully weaker ones. He likens the failure of the commune movement to the failed Color Revolutions* of the 1990s – which left Eastern European countries even more corrupt and unequal.

He seems to be making the case that egalitarian societies are impossible, which I strongly question. In my view the Color Revolutions failed for the same reason as the 2011 Arab Spring revolutions: because they were instigated, organized and funded by the CIA, State Department (and George Soros in the case of Eastern Europe) for the purpose of installing new governments favorable to US corporate interests.**

Enter the Club of Rome***

Two additional outcomes of the new field of ecology would be the formation, in 1968, of the elite roundtable group the Club of Rome and the first international environmental conference in Stockholm in 1972.

In 1972 the Club of Rome commissioned a study based on the theory that all human and natural activity was merely a vast interconnected system of feedback loops. The MIT computer scientists they hired developed a complex computer model based on the best population, resource, industrial production, agricultural production and pollution data. Their modeling, which the Club of Rome published in their 1973 bestseller The End of Growth, predicted major economic and environmental collapse in the first decade of the 21st century. The book maintained that the only way to prevent environmental and economic collapse was for western societies to give up their fixation with continuous economic growth.

The European left became extremely concerned that growth restriction would lock the ruling elite (who ran the Club of Rome) into their existing positions of privilege and power. They launched major protests against The End of Growth. They argued the proper role of the environmental movement should be to end the greed of political elites. That being said, the computer modeling on which the book is based predicted the 2008 economic collapse.

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* Title of 1967 monograph distributed free by California cybernetics enthusiast Richard Brautigan. Available for $400 from Abe Books

**Serbia Otpor (Resistance) Revolution (2000), Georgia Rose Revolution (2003), Ukraine Orange Revolution (2004) and Kirghizistan Cotton Revolution (2005) – see The CIA Role in the Arab Spring

***The early Club of Rome was financed by corporate oligarch David Rockefeller, the Congress for Cultural Freedom (see  and the Ford Foundation. The two latter entities are well known conduits for CIA funding (see CIA-funded Foundations)

 

The End of Growth

The End of Growth: Adapting to Our New Economic Reality

by Richard Heinberg

(New Society Publishers Aug 2011)

(This is the sixth of a series of posts about stripping private banks of the right to issue money. It stresses the link between our debt-based monetary system and the drive for perpetual economic growth.)

The basic premise of The End of Growth is that the world economy has flat-lined. Not only is it contracting, rather than expanding as most politicians claim, but there are important reasons why it will never return to pre-2007 growth levels. The reason? The last two centuries of continuous economic expansion were only possible due to the ready availability of cheap fossil fuels. Growing fossil fuel scarcity has caused energy costs to skyrocket. And this, according to Heinberg, is the main reason for declining economic growth.

As well as making an strong case that economic expansion has ended, Heinberg also writes about far-sighted governments (Japan, Sweden, Denmark, Norway and Finland) that are enacting policies to ensure the welfare of their citizenry as they confront new economic realities.

Heinberg and others in the Peak Oil/climate change movement have always argued that infinite economic expansion is mathematically impossible on a finite planet with finite natural resources. The End of Growth highlights the massive ecological devastation caused by this reckless obsession with economic growth, while warning that we are depriving our children and grandchildren of natural resources (fossil fuels, water, industrial fertilizers, fish stocks, top soil) that may be needed for basic survival.

In Heinberg’s previous work, he predicts it will take a decade or more before fossil fuel scarcity causes the capitalist economic system to hit the wall. In The End of Growth, he argues it already has: in October 2008. While a few countries can claim an occasional quarter of increased GDP, aggregate global economic growth is either stagnant or slowly contracting. Even China’s so-called economic “miracle” hasn’t been sufficient to generate a genuine increase in total global wealth.

The Ultimate Ponzi Scheme

Heinberg goes on to explain how private banks use the fractional reserve system to invent money out of thin air. In a global economic system where money can only be created by issuing bank loans, there’s never enough money in the system to repay all the debt. This means the global economy can only function via continual creation of new loans. And continuous economic growth is essential to make this happen.

Heinberg’s analysis of the 2008 meltdown starts with an introduction to classical economic theory, and a discussion of of the “financialization” of the US economy that occurred in the 1980s. There’s a detailed discussion of the risky financial derivatives that led to a decade of speculation and “debt” bubbles. The largest was the subprime/derivative boom, in which massive amount of borrowed money was speculated on derivatives and subprime mortgages that couldn’t be repaid. The debt bubble created was so large it plunged the entire world economy into depression when it burst.

The End of Growth in China

Heinberg also presents a painstaking analysis of why the China’s current phenomenal growth rate (7-8% per year) and somewhat slower growth rates in India, Thailand, Malaysia and Vietnam also represent “bubbles” that will eventually pop and trigger recession. China is pursuing the identical economy strategies that caused the Japanese economic miracle to collapse in the 1990s – resulting in a two decade long recession.

Life in a Steady State Economy

Obviously the end of economic growth, and continuing job, wage and benefit cuts mean that people in most industrialized countries will be forced to massively downsize their lifestyles. Outside the US, some far sighted governments are intervening in ways to make this transition less painful. Heinberg gives examples of countries (Japan, Sweden, Denmark, Japan, Norway) who openly acknowledge the reality of their steady state economies and pursue policies that make it easier for their citizens to adjust.

Sweden, for example, has transformed depressed industrial towns into “ecomunicpalities,” by “dematerializing” their economies. They have made them into fossil fuel-free towns with organic farming, public transportation and alternative energy projects – while simultaneously fostering social equity.

So You Want to Have a Revolution?

A 2013 study from Fairleigh Dickinson University reveals that 29% of Americans believe an armed revolution may be necessary in the next few years to “protect liberties.” The voter survey differed from most corporate media polls in that it included a substantial number of low income, cellphone only households.

18% of Democratic respondents shared this view, 27% of Independents and 44% of Republicans.

A decade ago, the notion that anyone other than a few thousand fringe extremists would contemplate violent revolution was unthinkable. At the very least, these results suggest a significant minority of Americans are profoundly disillusioned with the government’s apparent indifference to their needs and expectations.

The End of Growth: An Inconvenient Reality

Despite government claims to the contrary, recovery from the deflationary spiral that started in 2008 (aka The Recession) has been elusive. Although stock prices continue to soar, productivity, employment and consumer spending have stubbornly refused to return to pre-2008 levels. Some latter day (non-Wall Street) economists believe the era of economic growth has ended – permanently – owing to the soaring cost of fossil fuels. In their view, the world has returned to a steady state economy.

Given the historic link between growth and “full” employment (jobless levels below 10%), they are also predicting a scenario in which roughly half the adult population is unemployed. The paid work that remains will be low paid, part time, temporary jobs, unprotected by unions, employment rights or health and safety regulations.

To appreciate that US economic growth is at a standstill, it’s essential to look at undoctored economic data. For example, when Obama and the corporate media trumpeted a 7% unemployment rate for November, they neglect to mention that this figure only reflects the number of workers newly unemployed in the last six months (i.e. the number still receiving basic unemployment benefits). Unlike other countries, the official US jobless figure doesn’t include workers whose benefits have run out, who have stopped looking for work, or who want to work full time but are stuck in part time jobs.

Data from the Federal Reserve Bank of St Louis reveals that the US economy is shedding full time jobs, rather than gaining them. The percentage of unemployed Americans of working age has increased from 35.5% in 1999 to 41.7% in 2013 – the highest since 1980. Most of that increase (5%) has occurred since Obama was first elected in 2008.

The 2008 Economic Crash Was Predictable

Prominent members of the Peak Oil movement, most notably Michael Ruppert and Richard Heinberg, predicted the 2008 economic crash. They based their predictions on declining oil reserves, the failure of oil production to keep up with increasing demand from developing countries and the steep rise in oil prices that began in 2005.* Based on their calculations, mankind had extracted half of the world’s available oil reserves by November 2005. This was officially known as Peak Oil. We reached Peak Natural Gas several years before that, though we won’t reach Peak Coal for another decade or so.

Although there still remains tons of oil, gas and coal left in the ground for us to extract and burn, we are now on a downward slope. Not only is production continuing to outstrip demand, but most of the remaining oil, natural gas and coal are difficult to get at, expensive to extract and rely on dangerous, expensive, environmentally destructive and controversial technologies, such as deep sea oil drilling, tar sands extraction fracking and mountain top removal.

Capitalism and Productivity

The steady economic expansion we call growth is a relatively new phenomenon in human history. Prior to the 19^th century, the major nations of the world operated steady state economies. In fact the argument Heinberg and others make is the burst of productivity most of the world attributes to capitalism had nothing to do with the capitalist economic model itself. Rather it was based on the widespread abundance of cheap fossil fuels. British economists at the Fiesta Institute provide abundant data justifying this argument in Fleeing Vesuvius: Overcoming the Risks of Economic and Environmental Collapse. They point out that even at current oil prices, it costs far less to use a machine to perform work than to employ a human being or even a draft animal.

The birth of capitalism wasn’t just about the exploitation of fossil fuels. It was about the exploitation of all natural resources – clear cutting forests, large open pit mines to extract steal, copper, gold, bauxite (for aluminum), gold diamonds and rare earth minerals, draining swamps and eradicating wetlands. When oil started becoming more expensive (in the 1970s), it was also about moving western factories to third world countries to enable wholesale exploitation of human labor. Government encouraged this wholesale extraction and exploitation because it produced enormous prosperity for most of western society over many decades.

At the same time there were immense human and environmental costs. Western capitalism produced incalculable suffering in the third world as indigenous people were driven off the land that gave them a subsistence living, with the lucky ones obtaining jobs in brutal sweatshops that paid starvation wages. Suffering in the first world was less visible until last decade, when residents of the industrialized world began to realize they were being systematically poisoned with toxic industrial chemicals, increasing levels of both nuclear and microwave radiation and harmful organisms that had contaminated our air, water and food chain.

*Historically the oil price ranged between $2-4 a barrel prior to 1973 oil crisis. It remained between $10-20 a barrel until 1979. From 1979-1986 it fluctuated between $20-38 a barrel until 1986, when it dropped below $20 a barrel until 1989. It dropped below $20 a barrel very briefly in 1999. It hasn’t been below $40 a barrel since 2004.

photo credit: athens.rioter via photopin cc