Dave Pollard's environmental philosophy, creative works, business papers and essays.
In search of a better way to live and make a living, and a better understanding of how the world really works.

	June 26, 2008

The (Nearly) Impossible Challenge of Creating a Sustainable Economy (Part Two) Yesterday I explained what Jérôme Guillet in the European Tribune calls The Anglo Disease, and how it has produced a completely dysfunctional economy in many affluent nations (and co-dependence with struggling nations). I used the example illustrated above of a fictitious national economy that generates its wealth entirely by printing money, persuades other nations to accept that money in return for real goods, and addicts its citizens to living off a stock market Ponzi scheme believing, because the price of their shares is ever-increasing (giving them additional borrowing collateral), that they are somehow well-off despite not producing anything of value. I also explained the five deceptions necessary to perpetrate such a fraud, and how vulnerable the economy is to the public's (and other nations' citizens') catching on to these deceptions and refusing to go on stoking this phony and worthless economy. Part Two of this article, today, is a possible prescription for how such an economy could be transformed into a real, sustainable economy, Before I begin, however, I want to deal with three issues that several readers raised in response to Part One. The first is the power of innovation and the capacity of affluent nations to generate real value and make their economy more sustainable through innovative products, processes and technologies. The second is the argument that the existing phony economy, through printing and distributing funny money, is actually redistributing wealth from rich to poor. And the third is that it is somehow possible to perpetually enhance wealth and well-being of all people in the economy without increasing the use of resources, without 'growing'. Here are my responses: Innovation only really occurs when people with desperate human needs can afford to pay for solutions to those needs. The great innovations of civilization generally followed either a great equalization of wealth (e.g. the printing press, the assembly line) or a huge crisis (e.g. modern 'catastrophic' (monoculture) agriculture, nuclear power). For the last 50 years neither has been present and innovation has arguably almost completely ceased. It is far easier and safer for corporate oligopolies to 'create value' for themselves by using lawyers to hoard intellectual assets and eliminate competition, and propaganda to brainwash customers into overpaying for their product, than to innovate. When it comes to real, essential goods (food, textiles, construction, transportation, health care, education) there have been almost no important innovations since before the boomers were born, and the number of innovative companies can be counted on one hand (WL Gore, Apple, a few others). The real innovators in this period have been the poor, who have learned ways to 'work around' the oligopoly economy and make anything that can be transmitted in bits essentially cost-free. Companies like Google and the file-sharing pioneers have supported this free-bits innovation, but unfortunately it has had little impact on innovations around real goods. This kind of innovation will have to await a crisis, such as when our house-of-cards phony economy collapses. It is true that inflation can effectively redistribute wealth from rich to poor, since debts become repayable in 'cheaper' dollars than those originally borrowed. Unfortunately the current economy is in complete denial about the true inflation in our economy (driven by soaring health, insurance and education costs). So while large corporations can borrow money at the "official" inflation rate of almost zero, citizens are paying rates even higher than the real rate of inflation (the book The Two-Income Trap reported that average working class borrowing rates were about 16%) to subsidize the artificially-suppressed rates being paid by the rich (and by governments). So the rich borrow at 3% and earn 15% on Ponzi stock market returns, while the poor borrow at 16% to buy real goods whose value is not rising at all. The result is a massive redistribution of wealth from poor to rich, which is exactly what the rich and powerful (who realize that the whole economy is a house of cards and are busy secreting away wealth in durable goods, often offshore, to protect themselves) want. You cannot create material wealth out of nothing; to do so defies the laws of physics and thermodynamics. We have reduced costs by using automation to mechanize, but this depletes non-renewable resources and reduces the value of labour -- if you pay people less, or pay fewer people, to produce something automated inexpensively, then the people you want to sell it to have less money to buy it with, so you are ultimately no further ahead. The so-called 'green revolution', which applied industrial factory methods to agriculture, suffers from the same problems -- ever-increasing use of chemicals (made from oil) and automated methods, lowering the need and value for farm labour and depleting the soil so it becomes, like its tillers, addicted to oil which is in ever-diminishing supply. You can make information free, but when it comes to hard goods, you really can't make more out of less, and you certainly can't continue to do so indefinitely. So how might we transform the phony, house-of-cards economy into a truly sustainable one? As I suggested yesterday, to do so would be extremely difficult, require unprecedented cooperation and collaboration of all of us, and entail a great deal of sacrifice by people (us included) who (to put it mildly) have historically not been inclined to give up what they have so others can share. But if were able to achieve these conditions, here's how we might be able to do it: First, we would have to be honest with ourselves and with all the citizens of the world about the five deceptions and about the abject failure of the current economy to create real value or well-being for more than a tiny minority of citizens. There is no chance of working together on a solution as long as we remain in denial about the problem or what, and who, has caused it, and why, selfishly, they did so. This would be extremely unpleasant for the rich. There would be a widespread desire to bring the perpetrators to account.  Secondly, we would have to redistribute wealth -- assets, money, and position -- from rich to poor, both within and between nations. To become self-sufficient, struggling nations need to be given back the resources we stole from them, and retrained how to manage their own economies and provide for themselves. Within both affluent and struggling nations, power and wealth would have to be ceded and decentralized. Corporate charters would have to be revamped to mandate responsibility to local community, to employees and to the environment, rather than to shareholders. It would probably help in this effort to do away with the concept of share ownership entirely and to convert all corporations to cooperatives, broken down into autonomous self-managed units. Oligopolies would be outlawed (as they used to be) and the corporations belonging to them disbanded, with assets redistributed to the cooperatives. If you're a shareholder, you would be out of luck -- but then, you're going to be out of luck anyway when the existing economy collapses, so you will be no worse off. Governments (which are really another form of oligopoly corporation) would likewise have to devolve, their assets and authority redistributed to self-managing communities. This is what happens in economic depressions anyway -- when central governments go broke, citizens are left to look after themselves. Without a central government, how would we defend ourselves from outside invaders? We'll have to work that out collectively. Scary? Of course. Would governments, either in affluent or struggling nations, ever do this willingly? Probably not; they'd have to be persuaded. If this plan was easy, we'd already have done it. Third, we would need a program of massive re-education of citizens on how to make a living for themselves, in small, locally-focused cooperative enterprises. No one is teaching this now, but we do have a lot of good teachers who, if we taught them, could teach the rest of us. This would not be classroom education. In rich nations and poor it would be learning by doing, the way the Argentinian workers learned when they seized their padlocked factories after their economy collapsed and the factory owners had fled. It would be a very difficult and immensely valuable education. We would figure it out though -- we know what we need, and we'd relearn how to provide it for ourselves. Fourth, we would need infrastructure to share what we know and what we learn openly with others. This would not be a competitive economy; it would be a collaborative one. We would use this 'knowledge infrastructure' to work around problems and to identify and cut off those who attempted to hoard or gouge. We would use it to develop Peer Production, to identify needs and to co-develop innovative solutions to those needs. We would use it to virally market, to microfinance and organically finance enterprises, and to develop the enterprise partnerships, alliances and relationships essential to creating and sustaining true business value. The line between producers and consumers would disappear, and the very concept of unemployment would become meaningless.  Fifth, to nurture this economy, we would need fair trade laws in place of pseudo-'free' trade laws. These laws would protect local industry but enable the importation of goods and services that cannot be effectively produced locally. These laws would conserve scarce natural resources and the environment. We would need laws and taxes that would require all enterprises to be indefinitely sustainable, cradle-to-cradle. These enterprises would not need to grow in order to thrive and be of use in their communities as creators of well-being. Their mandate would be to get better, not bigger. Sixth, we would need to pledge, both as entrepreneurs and as citizens, to take collective responsibility for the well-being of all life on Earth. There is no room for greed, waste, or heartlessness in this economy. It must be, in large part, a Gift Economy, where money becomes unimportant, and might fall into disuse entirely. This is, of course, a tall order, and perhaps, without a massive global economic crisis at least, impossible. My only claim, based on my knowledge of history, economics and business models, is that it would work if we all wanted it to work. We may, some day in the next couple of generations, have no choice but to find out. Category: Alternative Economies 10:34:09 PM  trackback []  comment []

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