Is a sustainable economy a viable option?
Having read Jo Stiglitz about the changing demands on Democracy, I wish to propose some alternatives e.g. a sustainable economy; a steady state economy; a green economy. I want to make it clear that these may not be easy to adapt, and develop.
1. In the past, banks kept notes that they printed, and cash they were given by their customers
It has become clear during the arguments between politicians and economists since 2008 that the default financial position is ‘growth’, and ‘debt’.
‘Austerity’ is not acceptable because it limits growth by insisting on cutting costs, reducing debts, and repaying loans, and living within your means.
I want to examine the implications of these arguments for the collapse of an unsustainable economy and the development of a sustainable economy.
2. It is worth remembering that most people in the world are poor; surviving on the equivalent of 520euros to 5200 euros a year. The current debates and disputes that are taking place in Europe and the USA about growth and austerity are of interest only to those wealthy enough to be actively involved in the management of money. All discussions about ‘growth’ and ‘prosperity’ concern a minority of the global population - what has come to be called ‘the 1%’. As Christine Lagarde of the IMF noted recently, the conditions of the peoples in Sub-Saharan Africa are of much more concern to the IMF and World Bank than the shenanigans of Greece or Spain or Germany.
3. All the current discussions, whether by George Soros or Paul Krugman, or the World Bank or IMF, seem to assume that most people are prosperous and enjoy the benefits of employment and bank loans. They fail to mention that all growth is the product of debt. The creation of money as interest bearing debt demands that enterprises generate profits, out of which loan debts are repaid and benefits such as wages, bonuses, and pensions, can be funded.
The creation of money as interest bearing debt depends upon a fractional reserve banking system. At the moment, FR banking is unregulated. The need to create money as required by capitalist enterprises and corporations or governments means that if an individual has 1000, they can borrow 70,000; a corporation with 1 million, can borrow up to 100 million; a government with 1 billion will be able to borrow up to 100 billion. Each loan is secured by collateral but what is important to the banks is the payment of interest, the more the better. You may wonder how it is possible for the banks to make loans that are so much greater than the deposit. A simple consideration of the interest payments reveals all: a loan @ 8% for 20 years: 1000 generates 4662; 1 million generates 4.6 million; and 1 billion generates 4.6 billion. Under this system all enterprises are in debt, and have to pay interest. Governments, in particular, will use their tax revenues to pay their debts. The US government will pay $500 billion in a year as interest payments. To put it another way, governments use their taxes to pay the banks. They do not use taxes to supply government services. Countries like Greece, Portugal, Ireland, Iceland, are in trouble because they cannot afford to pay the interest! Their tax incomes are not enough.
4. Times of austerity and cost cutting lead to demands to pay off loans, and to stop borrowing money. These actions lead to loss of growth, loss of prosperity, loss of profits, loss of employment, failure to repay debts, failure to increase loans, failure to increase new money: in fact move towards Full Reserve Banking.
5. But recent comments by Soros, Krugman, IMF, World Bank, and Central Banks, demand that loss and debt must be secured by growth and loans. Please note that as long we continue to operate a system of loans and debts, the failure to create new money as loans will cause economic and financial collapse. A system of debt based growth has to be secured by loans and interest payments as well as collateral. This means that most enterprises are ‘owned’ by the banks, and depend upon loans, and upon growth to make profits to pay interest.. The entrepreneurs are trapped in a cycle of debt. Even the so called ‘1%’ are sitting on a mountain of debt. If cuts result in loss of consumption of all products, the enterprises will collapse, and the entrepreneurs will go bankrupt. The system of debt drives the search for growth, and maintains the demands for profits. It leads us to organize an unsustainable economy.
6. An unsustainable world is one where all products are over-exploited. Any product has to be found or made and sold as soon as possible so as to generate profits. The search for fuel oil continues to the sacrifice of the local landscapes, the pollution of water, and destruction of habitats. This search limits the development of alternative sources of energy simply because oil is the preferred option. Fishing the oceans using industrial methods leads to the exhaustion of all species, followed by the farming of fish and the use of synthetic foods. Forests are cut down leaving all the land bare and eroded. Recently, Brazil has been advertising eucalyptus plantations. The attraction is for financial returns, not the protection of the Amazon forests. Minerals are removed on a vast scale without any regard for the natural environment, such as water supplies, nor even local villages. Farming is carried out on an industrial scale, and crops are grown across 1000’s of acres and sold across the world, without any regard for the balance of species and the hunger of the local communities. Factories and their products fill the biosphere with waste products that poison the earth.
7. At the same time, there are persuasive arguments for the development of a sustainable global economy. What this means is that industrial, commercial, agricultural, maritime initiatives conserve and preserve the environment. Such initiatives respond to local needs not international markets.
Developments are designed so that the rates of exploitation balance the rates of restoration of products and materials. For example, fish are harvested in consideration of the replacement of the species. It is important to maintain the species or minerals or soils or water. They should not be exploited exclusively for profit.
An environmental economy will express the ‘steady state economy’. There will not be demands for large loans, and repayments will be limited by the rates of profit. It will be normal for Central Banks to provide the new money for the initiatives, by printing money.
7. According to the present system, money is interest-bearing debt. Governments, corporations, individuals sponsor their projects by loans. The profits are used to pay the principal and the interest. A capitalist economy depends on loans, and the banks depend on interest payments.
A new system must generate capital from tax revenues and cash payments, as well as printed money. It is to be based on cash, not interest. It will take longer to generate cash for investments. The development of initiatives will be ‘long term’.
8. A system that is based upon fractional reserve banking, and in which all new money is interest bearing loans, is dependent upon loan money. Our present system operates with 3% cash and 97% loan money. There is no way that this system can survive on cash, simply because there is not enough. The system operates by interest bearing loans. If the loans stop, the system collapses. All countries will reach the point when they run out of resources, money or materials. Their enterprises will not be able to produce commodities without loans. Each of these enterprises depends upon the availability of cheap finance. The resources are offered up as collateral for the interest-bearing loans. The profits are geared to repayment of interest, as well as the control of costs. In an unsustainable economy, the demands and rights of the local citizens are ignored in search for minimum costs and maximum profits.
9. A sustainable economy is one in which products are not mass produced; local landscapes are conserved; priority is given to renewable sources of energy e.g. solar, wind, water, bio-mass like olive waste. Local peoples bicycle. There is no demand for automobiles, nor oil products. The oil industry, petroleum, cars and trucks disappear. Fishing protects the survival of species: for example, nets are designed with different size holes so as to allow the smallest so escape and become adults; forests are protected, unlike the exploitation of the forests of the Amazon, and Prey Lang, and Khimki. The supplies of timber provided for heating are controlled. The extensive forests of Eastern Europe are under threat from local communities who are busy gathering the timber in place of heating oils and diesel that are becoming too expensive to use. Mining operations are planned to safeguard the lives of local communities, to preserve water supplies, and provide improved standards of living. Farming is organized on a local level, so as to provide food supplies to local communities and maintain the environmental balance between humans, plants, animal, insects. At the same time, biologists look for seeds and plants that can be more fruitful; able to survive on less rain; and to resist drought conditions; as well as to cope with torrential rains. Factories and processing are designed to produce little waste, and protect the soils and atmosphere of the earth. All enterprises are set up to consider their impact upon the biosphere. When supermarkets and retail warehouses are designed, the planners take into account the effects upon rainwater run off, local traffic flows, local shops. It is clear that a sustainable economy is completely different to present systems.
10. It can be argued that the world population of 7+billion people will automatically generate great demands for all products. But we have to remember that 6+ billion people are living in poverty. The basics that are taken for granted by half a billion people in Europe and the USA are luxuries for everyone else. The 6+ billion poor do not have reliable sources of electricity, water, sanitation, medical help, shelter, education, transport, food, employment, wages. However, once they demand a way of living that includes all these basics, the world economy will have to change.
11. A Green Economy will generate clean energy. There will be Green cities with open spaces, and limited auto-transport. Zero waste will be produced, industrially and domestically. Many different industries will be using a diversity of resources. Ecosystem services will look after plants and animals, atmosphere, carbon dioxide and methane; the provision of water and sanitation. There will be local living economies, supporting empowered communities.
12. Social Ecology is determined to study the impacts of human societies upon the conditions and stability of the biosphere of the earth.
Social Ecology will focus on the actions of human communities and their consequences for the natural environment.
Social Ecology is not interested in public statements by governments and corporations and individuals as to the protection of the environment; it is concerned to study and analyse their actions.
So when people declare that they are determined to protect the atmosphere, Social ecologists will look at their inconsistencies such as the continuing use of fossil fuels and the search for more sources of these fuels, along with their failure to develop renewable energy.
Social Ecology will observe the impacts of human behaviour in urban and rural settings on forests, fields, rivers, seas, air, fire and water. Social Ecologists will derive alternatives, designed to alter current behaviours: they are descriptive, investigative, analytical, judgemental, and prescriptive.
www. Oregon environmental council
Centre for the Advancement of Steady State Economy.
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