How Economic Growth is Destroying the Environment

Growing Pains: The Ecological Costs of an Insatiable Economy

Al Jazeera (2019)

Film Review

This film begins by linking the new concept of GDP (Gross Domestic Product) introduced after World War II) with the popular myth that ever increasing GDP is a magic formula for preventing recessions and depressions and the mass unemployment and misery that accompany them.

Following the second world war, western countries experienced three decades of 8% GDP growth, resulting in near full employment and massive expansion of their middle class.

Unfortunately by the 1970s, most of western society had acquired all the cars, TVS, fridges and washing machines they could ever use; growth stalled and unemployment started to rise again. It was around this time the elite round table group Club of Rome* first questioned whether unlimited growth was possible on a finite planet.

In the 1980s, Wall Street’s answer to stalled growth was monetarism, a belief they could stimulate growth and prevent recessions by deregulating the the financial industry and simply controlling the money supply.

Instead of relying on the production of goods and services to increase growth, western economies began relying on the creation and trading of financial products (credit cards, mortgages, currency exchange, commodities futures, debt-based bonds, options and other derivatives) to keep the economy ticking over.

This seems to to work pretty well until 2008. Global growth collapsed that year and never really recovered.

The film directly challenges, from several perspectives, the pro-growth hype put out by various financial gurus. First they look at the heart breaking ecological damage wreaked by skyrocketing growth in Brazil’s Amazon rain forest. Next they examine evidence that the creation and trading of financial instruments is actually glorified gambling and speculation (in which winners have become fabulously wealthy at the expense of most of the middle class). And finally they talk to psychologists who challenge Wall Street’s claim that human beings have an endless desire to accumulate more useless stuff.

In my view the film’s major weakness is its failure to link the pressure for perpetual growth to our debt-based monetary system. At present, contrary to popular belief**, private banks create 97% of our money out of thin air when they issue loans (see An IMF Proposal to Ban Banks from Creating Money). This results in an ever increasing debt spiral, which can only be repaid via continuously increasing economic growth.

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*See The Steady State Economy Movement

**When polled, most people in western countries express the belief that all money is issued by government.

The film can’t be embedded for copyright reasons but can be viewed free at the Al Jazeera website Growing Pains

Why Growth is the Main Cause of Poverty

Growth Equals Poverty

Vendana Shiva (2013)

In this presentation, environmentalist and anti-globalization activist Vendana Shiva challenges the Wall Street mythology that economic growth reduces poverty. Using her own country India as an example, she demonstrates how poverty (and inequality) increase in direct correlation to GDP increases.

The examples she offers clearly apply to the US, UK and New Zealand. All three countries are experiencing alarming increases in poverty and inequality as GDP increases. As in India, the quality and availability of health, education and other public services have declined steeply as “growth” has increased.

She goes on to demonstrate what GDP growth really represents: the privatization (ie theft) of natural and public resources by a small number of elites.

In India at present, 1/4 of the population lives in abject poverty and 1/2 of children are malnourished. Vendana blames the increase in hunger on the forced adoption of industrial agriculture and GMO crops. Monsanto and GMO advocates like Bill gates argue that GMOs will decrease world hunger. In India, where Monsanto has successfully lobbied to make it illegal for farmers to save seed, just the opposite has happened.

This due partly to Monsanto’s seed monopoly, which has caused an 8,000% increase in the cost of seed; partly to the high cost of fertilizers, herbicides and pesticides GMO crops require; and partly to the destruction of soil, bees and biodiversity caused by industrial agriculture and GMO crops.

The Mommy Tax

The Price of Motherhood: Why the Most Important Job in the World is still the Least Valued

By Ann Crittenden

Henry Holt and Company (2001)

Book Review

The Price of Motherhood is about the refusal of English-speaking countries to acknowledge the vast amount of unpaid labor women invest in their children. Economists agree that two-thirds of society’s wealth is created by human skills, aka human capital. Yet they also refuse to acknowledge thirty years of psychology research demonstrating that the most critical education producing this “human capital” occurs in the first five years of life.

Not only is most of this work unpaid, but mothers who require part time or flexible work arrangements to address their children’s needs pay an enormous penalty in terms of lifelong earning potential. Crittenden refers to this penalty as the “mommy tax.”

According to Crittendon, while the pay differential between men and women continues to narrow, there has been virtually no change in the pay gap between mothers and unencumbered men and women. Numerous studies identify this “mommy tax,” consistently highest in English-speaking countries, as the primary cause of child poverty in the US, the UK, Canada, Australia and New Zealand. Likewise a woman’s “choice” to become a parent is the number one cause of poverty in old age.

Crittenden contrasts the US with France and various Scandinavian countries that support working mothers through policies such as free health care, one year paid maternity leave*, and free childcare. Child poverty virtually unknown in France and Scandinavia. In contrast 22% of American and 25% of New Zealand kids grow up in poverty.

The book is also highly critical of economists’ failure to count women’s unpaid labor in the GDP, given its high importance in creating a skilled workforce.** Despite the US refusal to keep data on “non-market” labor (where no money changes hands), more civilized countries do. Crittenden cites figures from Australia (where it comprises 48-64% of GDP), Germany (where it comprises 55% of GDP, Canada (where it comprises 40% of GDP), and Finland (where it comprises 46% of GDP).

Besides including “non-market” labor in the GDP calculations, the book proposes a number of other policy changes to reduce or eliminate the mommy tax. They include federal laws mandating one year paid parental leave, free health care for all children and primary caregivers, and free preschool for three and four year olds; a shorter work week; and equal pay and benefits for part time work. They also include a federal ban on discrimination against parents in the workplace, a universal child benefit, the creation of a single federal agency to collect child support obligations, and a federal mandate requiring divorce courts to award both parents an equal standard of living where there are dependent children.

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*The only six countries that fail to mandate paid maternity leave are the US, Australia, New Zealand, Lesotho, Swaziland and Papua New Guinea.

**See review of Marilyn Waring film Whose Counting

The Refusal of Global Economists to Recognize Women’s Unpaid Labor

Whose Counting?

Directed by Terre Nash (1995)

Film Review

 

Whose Counting is a 1995 Canadian documentary about the early life of New Zealand feminist Marilyn Waring. With her 1988 book If Women Counted, Waring was the first to challenge whether GDP (gross domestic product) is an effective way to measure the performance of a national economy.

New Zealand’s Antinuclear Ban

The film begins with Waring’s election to the New Zealand parliament in 1977. The youngest member of Parliament (at 23), she was elected to a safe National (conservative) seat in rural Waikato. After serving three 3-year terms, she brought the government down by “crossing the floor” (ie signaling her intention to vote with the Labour opposition on the anti-nuclear issue).

Then prime minister Robert Muldoon called a snap election. He was voted out of office, with 72% of New Zealanders supporting Labour’s platform of permanently outlawing nuclear weapons and nuclear power in New Zealand.

Because the US government refuses to disclose whether their ships are nuclear powered or carry nuclear weapons, as of 1984 all US naval vessels are banned from New Zealand sovereign waters.

Negating Half the Planet

During her term in Parliament, Waring served on the Public Expenditure Committee and was troubled by was she learned was the UN System of National Accounts. As a condition of belonging to the UN, IMF and World Bank, all countries must use this system, developed by economists Maynard Keynes and Nicholas Stern after World War II.

Because this accounting system only attributes value to cash generating activities, it negates the productive activity of over half the planet – and of the planet itself.*

The film has a really humorous scene in rural Africa where women grow and cook all the food, collect all the firewood and water, and do all the housework and child and elder care – while the men lie around all day “supervising” them.

However it stresses that women also work far harder than men in the developed world. Two-thirds of all primary health care is delivered by women in the home. Yet because they receive no cash payments, all this work is virtually invisible.

Counting Environmental Damage as Growth

Waring is also extremely critical of a global accounting system that counts the immense environmental damage caused by the Exxon Valdez spill as positive GDP Growth. Given that the five permanent UN Security Council members (US, UK, France, Russia and China) are also the world’s biggest arms exporters, she finds it no surprise that the carnage of war counts as GDP growth.

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*Waring was also an early promoter of the concept of “ecosystem services,” essential services provided by nature in purifying water and air, sequestering carbon, stabilizing climate, providing for food crop pollination, etc.

The film can’t be embedded for copyright reasons. However it can be viewed free at https://www.nfb.ca/film/whos_counting

 

The 1% at Their Finest

The Super Rich and US

BBC (2015)

Film Review

The Super Rich and Us features casual cameos of British billionaires openly displaying their narcissistic indulgence in trophy assets. There is also a brief appearance by economist and author Thomas Piketty (Capital in the Twenty-First Century). The goal of the documentary is twofold: to debunk trickle down theory and to critique government policies that have made Britain one of the most unequal nations on the planet.

The filmmakers maintain that Britain’s top 1% generates and consumes all the so-called growth the UK has experienced over the last five years. None of it derives from increased investment, job growth, wages or productivity.

The British 1% has doubled their income between 1980 and 2015, while income for everyone else has stagnated or declined. Likewise the Conservative government’s 80 billion pounds in austerity cuts is roughly equal to the bonuses banks paid out to CEOs.

Why Britain Has the Most Billionaires

The UK has more billionaires per head (104) than any other country. This stems largely from a policy decision to compensate for factories moving overseas by making the country a tax haven for rich colonials seeking to avoid taxes in their own country – under the delusional belief it would make everyone else richer.

In the 1980s, Margaret Thatcher significantly reduced taxes on Britain’s native millionaires and billionaires. She argued, as Reagan did in the US, that taxing the rich made society poorer. These policies, which have changed little over thirty years, have made Britain the world’s favorite tax haven, as international pressure forces other traditional tax havens (Switzerland, Luxemburg, Cayman Islands, etc) to shut up shop.

Trickle Up vs Trickle Down

Thanks to the wholesale repeal of banking and corporate regulations, none of this surplus wealth trickled down to the rest of the population the way Thatcher claimed it would. Instead the super rich have been sucking up shrinking lower and middle classes resources into their vast reservoir of private wealth. The main reason trickle down doesn’t work is that the 1% spends their surplus wealth on diamond jewelry, yachts, sports cars and other luxury goods that generate income for only a handful (if any – most of these goods are imported) of working people.

The film contrasts British tax policies with those of Sweden and Denmark, which the rich pay a fair share of taxes. Not only do both have GDPs equal to or higher than the UK’s, with numbers that reflect genuine improvement in productivity and job and wage growth. When polled, eighty-eight percent of Danish people are perfectly happy with their tax rate because they see it reflected in generous government services.

Did Global Economic Growth End 15 Years Ago?

According to London Broker, Global Economy is Shrinking

The main premise of Life After Growth: How the Global Economy Really Works – and Why 200 Years of Growth are Over  is that global economic growth has ended. Western governments conceal this fact through debt creation, inflation and clever manipulation of statistical economic indicators. According to Tim Morgan, leading analyst at the London financial brokerage Tullett Prebon, economic growth ended in 2000 and the economy has been shrinking ever since.

Morgan attributes the end of global economic growth to the high cost of fossil fuels.* This is because the real economy (which many people confuse with the financial economy) is a direct function of surplus energy. In pre-agricultural times, there was no energy surplus: human beings derived exactly the same amount of energy from their food as they expended acquiring it. With the advent of farming, they managed to produce a small surplus of energy that enabled a small minority to engage in work other than food production.

In the 18th century the invention of the heat engine enabled surplus energy (and the real economy) to grow exponentially over the next 200 years. Now that the cheap fossil fuel has been used up, our energy surplus is declining. This, in turn, is reflected in the gradual shrinkage of the global economy.

Measuring Surplus Energy

Energy surplus is measured as EROEI (Energy Returned Over Energy Invested), the ratio between the energy produced and the energy consumed in the extraction or production process. 1930s oil fields had an EROEI of 100:1. Once the easily accessible oil was used up, the EROEI began to decline. It was 30:1 in 2000 and it declines by about 2% a year. In 2014 it stood at 14:1. Unconventional oil sources have an extremely low EROEI (eg tar sands and fracked shale oil have an EROEI of 3:1).**

Declining EROEI’s are always accompanied by a spike in oil prices. This translates into higher prices for everything, due to the energy required for food production and manufacturing. Owing to higher prices, people consume less and the economy slows.

Globalization Has Been Extremely Damaging

Morgan is highly critical of politicians who fail to distinguish between the real economy of goods and services and the shadow economy of money and finance. He also feels globalization and rampant consumerism have been extremely damaging to the real economy. The mistake western countries made with globalization was reducing their production without reducing consumption. Instead they increased consumption levels by increasing borrowing and debt. Globalization was extremely beneficial for banks, due to the voracious demand for their product (loans). Meanwhile the diversion of large sums from production to the finance sector – aggravated by consumerism and the rise of consumer debt – hastened the decline of the real economy.

This wholesale debt creation and the widening split between the real economy and the financial economy is largely reflected in inflation and the destruction of the value of money. The US dollar lost 87% of its purchasing power between 1962 and 2012, which the government systematically conceals through misreporting of key economic indicators.

All economies function best when the financial economy coincides with the real economy. At present the primary methods of debt destruction are quantitative easing*** and inflation (it’s always easier to repay debts with devalued money). Other methods in the wings are cuts in pensions and Social Security payments and eventually bank failures and government defaults. Morgan feels that resource poor countries like Japan and the UK are at highest risk for default.

How Governments Lie with Statistics

My favorite chapter details the decades of statistical manipulations that have made government indicators of inflation, growth, output, debt and unemployment totally meaningless. John Kennedy was the first to exclude “discouraged” workers (who weren’t actively seeking work) from the unemployment rate. Johnson was the first to conceal the size of the government deficit by including the Social Security surplus in the federal budget. Nixon was the first to exclude energy and food costs (which rise the fastest) from core inflation calculations.

I was most shocked to learn that 16% of GDP consists of “imputations” or dollars that don’t actually exist. The largest single imputation the US government adds is “owner equivalent” rent. This is an amount equivalent to the rent all rent homeowners would have to pay if they didn’t own their own home. In 2011, this added up to $1.2 billion (out of a total GDP of $12.7 trillion).

The second largest imputation involves non-cash benefits employers give their workers (medical insurance, meals, accommodation, etc) and free banking services.

The US Government is Technically Bankrupt

This over-reporting of GDP, combined with under-reporting of inflation, makes it appear that the US economy is growing when it’s not. .

Morgan estimates that as of 2011 true US debt (government, business and personal) was 449% of GDP. Technically this means the US is insolvent as collective liabilities far exceed any realistic prediction of future income.

Politicians Need to Stop Lying

Morgan maintains that industrialized societies urgently need to living with less surplus energy. Rather than continuing to delude themselves (and us), our political leaders must face up to the reality that our claims on future energy surpluses (aka debt) are totally unrealistic.

They need to end globalization and rampant consumerism and enact policies (support for renewable energy, public transport and strong local economies) that will help people adapt to the new economic reality.

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*Most analysts predict oil prices will return to $100+ a barrel in June 2015, once the US surplus is used up.
**Some other EROEI’s (for the sake of comparison):
• Coal 8:1
• Solar PVC panels 8:1
• Solar concentrating power: 17:1
• Large hydro generation: 22:1
• Small hydrogenation 32:1
• Landfill/sewage gas cogeneration 40:1
• Onshore wind 20:1
*** Quantitative easing (QE) is an unconventional form of monetary policy where a Central Bank creates new money electronically to buy financial assets, like government bonds. This differs from conventional money creation, in which private banks create money out of thin air as new loans (see An IMF Proposal to Ban Banks from Issuing Money).

Also published in Veterans Today