By Murray Grimwood*
Religions use theatre, to impress their customers. Architecture, pomp and circumstance, ritual and chanted mantra are all used to make it seem important, seem real - but at its core, there is only belief. Growth-demanding economics closely resembles religion. There are imposing facades (behind which are merely computers and people), an in-house language (their latter-day Latin), High Priests (whose every word is reported deferentially) – and reliance on a generally-held belief.
The history of growth-based economics is well known – the on-behalf storage of gold, the issuing of proxies for that gold, then the issue of more proxies than the gold underwrote. The borrowing public were conned into thinking that the particular coin they handed in had their name on it and that they could get it back any time. It worked most of the time, while believers were in the majority. A mass loss of faith, of course, exposed what was essentially a deception – the issuance of more proxy that there was equity.
The system kept itself going for some time, but no exponential growth goes for many doubling-times and the inflection is well behind us with this one. The growth was – when you strip away the jargon – in bets that the future would be ever-bigger than the present. As with the inevitable shortage of gold in an old-time bank run, we are now into the inevitable shortage of planetary parts required to back all the current bets. Unless the betting-slips are de-valued to fit, of course.
Meantime, priests (and their parish-newsletter disciples) continue reciting their reassuring creeds, causing those of us who see the world for what it is, some frustration. But the issuers of levered proxy (nowadays only levered off other belief-valued stuff anyway) and those who do all the downstream derivative huckstering, are only doing their jobs. It has always worked in their experience, and their experience is what made the believing mass give them High Priest status. Perhaps we should ‘forgive them, for they know not what they do’.
If we look at Economics today, we can sum it up as ‘using history to predict the future’. No wonder it never predicts crashes, then, and no surprise that only a small minority warn of them pending – the thinking end of the believing bell-curve will always be a small minority, as were yesteryears’ religious heretics. We also notice that those who point out the fatal anomaly in the growth-requiring system are all people (here, here, here) with knowledge of the real world and by implication, its physical limitations.
The current ritual is to issue ‘money’ which is actually debt. That debt is an expectation that the future will deliver an underwrite – in other words, it’s a bet. And as every Bookie’s runner knows, bets are a game of offloading risk. When the horse has declining form, the odds are raised. When the horse is obviously dying (as when the CBR offered 150% in 1998) nobody will accept the runner’s offload and those who bet early, drop their worthless stubs in the bin.
It might once have been interesting to argue that personal financial advancement (at the expense of others) was Darwin in action. When the collective competition threatens the existence of all players, though, unfettered personal advancement equates to species suicide. That system is past its use-by date. We need a new one.
The new system is easy to design. It has to be acknowledged that ‘market forces’ and ‘the invisible hand’ are fatally inadequate anticipators - indeed they are contributors to our current trajectory, one well into overshoot and nearing collapse. Firstly we need to assess, address and legislatively protect, the biosphere. Or there will be no ‘economy’ anyway. We need, also, to define ‘outcomes’ in other than monetary terms – the concept currently held with such fervent faith.
These are political leadership moves; framework-setting stuff. Starting with that biosphere protection, we need a serious discussion about individual access to it. Child poverty for instance – despite myriad Church of Orthodox Finance interpretations – boils down to ‘Child access to processed planetary parts.’ The short form of that is ‘Child access to energy’ (without which no planetary parts are processed) – so my suggestion for a new ‘Gold Standard’ is the Petajoule. If that sounds heretical, remember the intelligent lookers-forward of the recent past – Verne, Wells, Toffler, Orwell. They didn’t get everything right, but they were righter than their past-steeped peers. The modern versions (here, here, and here) are food for thought – particularly re the issuance of reality-related ‘credits’. Daly too has long been the guru of ‘steady state economics’, probably the best starting-point for those willing to assemble a revised testament.
What is less clear (and almost un-discussable due to key-player indoctrination) is how to transition the growth system to a sustainable one, without crashing the society it temporarily served. How one deals with mass-held QE-injected expectations of future buying-power (via house ‘worth’, pension ‘worth’, investment ‘worth’) I do not know. Having seen the inevitable coming for decades I’m inclined just to say caveat emptor, but the societal ramifications (Russia post-collapse is a thought-provoking case-study) suggest we try for better.
A good start money-wise, would be for the outlawing of interest. Outlawing enclosures (which are not just about land-tenure, as we’re seeing with patenting and ownership of life-supporting stuff would be a helpful political move too. Add in the concept of a circular, no draw-down economy, and maybe our combined bets would be confined to the in-form horses. Maybe.
But no tea-leaf reader ever quit voluntarily, and even though the signs are everywhere – from migration caravans to border-closings, from bailouts to Brexit, from deposit haircuts to trimmed hedgings – the attempt is still being made to continue the uncontinuable. Whenever the music falters, those parish newsletter-types soothe us with linear incantations of the ‘It’ll be alright, it always is’ kind – as we’ve seen in recent weeks. As well, those who control the current system have no option but to continue it – it’s all their specialisation trained them to do, even leaving aside the fact that nobody abandons a system they see themselves as ‘wining’ in. So the chances are that the global system will go until it can’t, almost certainly via a crash due to a mass loss of faith – the disillusion moment – as came close in 2008 when the bankers even lost faith in each other.
A that point governments (and ours has the happy advantages of physical borders and low population numbers) will have to set up a system which delivers food, water and energy to people – mostly city-domiciled - and set up a system which coordinates it. You don’t have to ‘fund’ things like that – you do have to throw energy at them though, and apply triage to fit your energy availability. And you don’t have to ‘pay’ people – they’ll do it for food, water and shelter when they contemplate the alternatives, though a way of dealing with freeloaders would perhaps be beneficial.
Having to maintain/adapt our infrastructure in such a scenario will require all skilled hands to the pumps and a good deal of strategic improvisation. My guessing is that we will regret losing such useful facilities as Hillside Workshops (but not for the reasons advanced by it’s local MP). Can those useful people be recompensed and can tax function inside a post GF-collapse country, to recompense them with? What use will all the parasitic/rentier echelon be put to? Will they migrate out of the cities? If all the forward bets (that were being relied-on to fund the old age of a demographic bulge, and beyond) vanish in a puff of virtual smoke, how do we care for the aged and recompense the carers?
It’s not as if these thoughts haven’t been expressed before. Here’s Samuelson from 1973 (Economics, p924): ‘Nevertheless, there is considerable disquiet about the limited progress of orthodox economics in solving real-world problems. Some economists see this as being due to excessive abstraction and neglect of realism in making assumptions, excessive use of econometrics and failure to establish links with other (sic) social sciences.’ The antidote (Biophysical Economics) is yet to become mainstream.
What of alternatives, for when the fires of the Productivity Inquisition die down and the money-changers have been run out of the Temple? Bitcoin is perhaps the most famous protestant challenge to monopoly banking, but Bitcoin currently has energy-consumption issues, and perhaps technical-complexity-requiring ones too. Local initiatives wax and wane (a Home Guard only becomes a necessity after the declaration of war) but Timebank and Green Dollars are two genuine attempts to anticipate. If things get really local, they may point the way. And the High Priests? Could be put to useful community work, repatriating the biosphere their trumped-up creed destroyed.
Murray Grimwood comments on interest.co.nz as PowerDown Kiwi.