“Sustainable Growth” Wasn’t
There’s something that bugged me about this article (indeed, bugs me about most economic analyses of our current crash). Amidst a discussion that fairly lays out some of the problems with the global economy (all the while ignoring that one critical issue in the US is a gutting of manufacture and unions and therefore increasing inequality), it talks about how to rebalance the global economy so as to return to “sustainable growth.”
What it failed to create, however, was the kind of virtuous cycle of growing sales, growing profits and growing employment, all feeding off of one another, to keep the economy growing even as the stimulus wears off — “escape velocity,” to borrow a term from aerodynamics.
The truth is we’re in something of a trap. Until imbalances are corrected, the U.S. and global economies are unlikely to return to robust and sustainable growth. And yet to the extent that we address these imbalances, the correction process will inevitably be a short-term drag on an already weak economy.
I mean, aside from Pearlstein’s blind reverence for the market, he’s right about the notion of balance. It is true, for example, that the newly rebalanced globe, America will play a smaller role as the consumer of last resort.
But it’d be nice if, at the same time as analysts think about rebalancing the global economy, they’d consider what their idea of “sustainable growth” meant in the past–and what it would mean in the future if it continued unchecked. After all, the sustainable-growth-that-turned-out-to-be-unsustainable of the last 60 years of a globalized economy caused climate change which will be an increasing drain on even a growing economy as disasters become worse and more frequent.
The spending on unnecessary consumer goods, the transportation miles driven, the dietary patterns, the waste. Those things caused climate change. Those are the things economists would like to return to, if slightly adjusted around the globe.
Since we’re going to be spending the next couple of years trying to find “sustainable growth,” do you think we could also keep in mind what would be truly sustainable for the globe?
This point drives home the tragedy of Obama pushing Van Jones under the bus. Jones has clearly laid out what truly sustainable growth looks like and was even in a position to at least nudge it along, but that just couldn’t be allowed.
It appears that not everybody wants sustainable growth…
From the ‘Right Wing Authoritarianism’ Wiki:
“Authoritarians are generally more favorable to punishment and control than personal freedom and diversity. For example, they are more willing to suspend constitutional guarantees of liberty such as the Bill of Rights. They are more likely to advocate strict, punitive sentences for criminals, and they report that they obtain personal satisfaction from punishing such people. They tend to be ethnocentric and prejudiced against racial and ethnic minorities, and homosexuals.
“In roleplaying situations, authoritarians tend to seek dominance over others by being competitive and destructive instead of cooperative. In a study by Altemeyer, 68 authoritarians played a three hour simulation of the Earth’s future entitled the Global change game. Unlike a comparison game played by individuals with low RWA* scores, which resulted in world peace and widespread international cooperation, the simulation by authoritarians became highly militarized and eventually entered the stage of nuclear war. By the end of the high RWA game, the entire population of the earth was declared dead.”
* The so-called ‘Right Wing Authoritarianism’-scale.
Aren’t nearly all of our economic models based on an unlimted supply of “inexpensive” energy? I mean, haven’t we been cheating for the last century by burning coal, oil and natural gas?
That’s what I figure. We’ve waited too long, and we’ve gutted our workforce to compensate for the rising costs of energy in the process.
So it’s all connected, and we probably need something resembling a “government” to help lead the way out. Sounds all too familiar….
@noble_serf: Yeah. And Cheney chose–and took Bush with him, and then Obama followed them–to double down on oil rather than start shifting to something different.
Good post, EW. Pearlstein is channeling later-day Mellonism (“liquidate labor … liquidate farmers … liquidate… liquidate”) without Andrew Mellon’s ruthlesslessness. Pearlstein says we must all live through this recession until de-leveraging of households is complete and there is not much the Treasury or the Fed, or Congress for that matter, can do about it. Even Hoover dumped Mellon and his advice in early 1932. A first step is to reject Mellonism (and Pearlsteinism).
Sustaiable growth is the catchphrase Naomi Klein points out as the marker for disaster capitalism. That and other buzzwords are all part of the framing of the Washington Consensus.
“Sustainable growth” is an oxymoron. On a finite planet with finite resources, growth must eventually cease. The question becomes at what point is a sustainable equilibrium achieved? The second question then is what form do we need an equilibrium economic model to take to provide a comfortable existence for everyone on the planet?
And how do we convince the “I’ve got mine already, too bad about you” types that they need to redistribute?
Why don’t economists connect their jargon [words like balanced,sustainable, profits,growth, employment,globalization,etc]with the broader concept of fairness, aka justice?
Justice, as fairness, in all dealings seems relevant here. It certainly would proscribe much that is wrong with current practices of “economics”. Is it too simple? Too naive?
Unfairness yields social chaos.
I graduated as an economics major in 1981, so I understand nothing. The world has changed. We were taught that externalities should be factored into prices. If a product contributes to the Pacific garbage patch, the cost of clean-up should be included in the price of the good, usually in the form of a tax. All I see now is short-term thinking. prices do not include the price to society.
The biggest imbalance that needs to be addressed for growth is the wealth/asset control imbalance. Not a socialist by any means, but nationally and globally, the teeter is stuck in totter.
“…the miles driven, dietary patterns, the waste… These are the things economists want to return to…”
I don’t know what economists you mean by this. The ones I’ve seen seem to consider these things. Such thinking does seem to be common amongst investment analysts, who are looking for the highest and “sustainable” return on investment. This thinking,I think, is using an inappropriate economic model. (Boy, reading my own words makes me sound like a player; I’m not) The model that spawns a term like “sustainable growth” seems to view the economy as a machine to be tweaked, tuned or repaired to get it “back to running normally”. Indeed someone in the last few days referred to the budget deal as a Rube Goldberg contraption with its triggers and brakes.) From what I’ve gathered from my economic reading this spring, it would seem that a biological model is more appropriate. Here growth is a natural process, given certain conditions. Given the fact of seasonal variation, trees do not sustain growth at an even rate all year. To make the analogy better, one cannot expect to harvest investment fruit all year long. The management of an economy can be viewed as a form of gardening, helping sustain life by addressing conditions, rather than attempting to maximize “sustainable” yields.
SatinWound/Mary—and those matters speak to fairness.
What about letting people vote with their feet?
Imagine the people’s flight of money from old Wall Street institutions if Liz Warren started her own Peoples’ Bank and issued credit cards with fair terms?
The NYSE was started on Wall Street by agreement by brokers signing a contract under the buttonwood tree.
For Warren’s possible bank, a similar tree symbol could be employed, the Weeping Willow. It lives in swamps, soaking up the water. In residential areas its roots spread out and take over sewer drains.
Plus, the Scott Joplin has already written the theme song for the Weeping Willow (and recorded it on a piano roll):
@phred: Glad I scrolled down to read the comments. Phred, you took the words right out of my mouth. Growth implies movement to something bigger, sustainable is when something is contained within its limits.
Justice as Fairness – where have I heard that?
Sorry for the O/T, but Craig Murray has responded to the new evidence of UK complicity in torture [Marcy mentioned him in her post about it.] I’ve linked to his post on that thread.
This sustainability issue got me to thinking. I mentioned the notion of managing an economy as gardening, and it occurred that a good leader would be an organic farmer, rather than a social manipulator. This got me to considering how we go about choosing our leaders. It seems we’ve got the process all wrong. At election time we should be holding interviews for the candidates, selecting the most appropriate. Instead what I see is they tend to look at us as customers, and their role is to give a sales pitch, to make themselves look like just what we need. We can’t expect to change that; they all want to make a good impression, but those doing the interviewing should have a firm view as to just who is in charge of the interview, and who is the applicant. How we get there is something to work on.
@rg: Jon Tester is an organic gardener of sorts. BUt he’s not necessarily the best leader.
Well OK; too simple a notion perhaps. Yet, he’s not in the decider’s chair. I was thinking about how one’s mind works when confronting problems, such as economic health, and having to go with what you know. If what you know is reliance on financial services and government policy, you get a different sort of manager. And we need to get smarter about assessing what our applicants understand about life.
When economists refer to “sustainable growth” of a thing, they generally mean growth at a steady rate that won’t shift due to internal changes that occur because of the dynamic; heat of friction is completely dissipated and that kind of thing. So the constraints against which the “mechanism” operates would have to be taken account of properly in determing the rate, and sustainability apply only within those constraints.
That said, I don’t claim to know off hand what Pearlstein meant, not having even read the article yet.
And as a political matter, I’m pretty sure that Mary has put her finger on it (i.e. detonated). For just one example, look at how important, and how costly, control of mass media is. ‘Tis a conundrum of a different sort.
Btw, site’s starting to look pretty good!
Excuse me, isn’t an endless, out-of-control growth also a way to describe cancer?
@phred: There are no models of steady-state economies. Nobody has any clue as to how one could construct such an economy. It would be nice if some economists were working toward such an understanding, but business schools being what they are, I doubt such people could get funded.
Growth can be sustainable if we separate ourselves from the zero-sum assumption that the Earth is the only place we can possibly be.
Out there, in the solar system, is a bounty of available resources and energy — but only if we have the will to reach for it before it’s too late.
I guess it’s something like “moral majority”.
@Ken Muldrew: I did it once on SimWorld. (In fact, I rather famously did it while the rest of my family was in a yelling game of rail barons I had refused to play). Only thing was, it took lizards or bugs to reach that level of sustainability.
@BeccaM: Or we could be content with the zero sum world we live on.
@emptywheel: Ecosystems (even real ones) can maintain steady-state conditions for a long time, given a reasonably stable environment, but human economies are very different. The ideological component for one, but also curiosity, inventiveness, and all that. The best way to maintain steady-state in the economy, from the perspective of history, is to keep 99% of the populace at subsistence. So who knows…maybe the neo-feudalists really are going for sustainability. :-(
But continual growth is not always unsustainable. The growth of knowledge, for example, is not necessarily tied to resource depletion. At least not in the same way that the growth of people buying 5th wheel trailers and crew-cab trucks is.
Anyway, as far as anyone can understand an economy, it has to be either in growth or decay; steady-state is a balance-point on a pinhead where the time between measuring when the point of balance is lost to the time when any meaningful reaction can be put into play is many orders of magnitude longer than would be necessary to keep it in balance.
AGENT SMITH: I’d like to share a revelation that I’ve had during my time here. It came to me when I tried to classify your species and I realized that you’re not actually mammals. Every mammal on this planet instinctively develops a natural equilibrium with the surrounding environment but you humans do not. You move to an area and you multiply and multiply until every natural resource is consumed and the only way you can survive is to spread to another area. There is another organism on this planet that follows the same pattern. Do you know what it is? A virus. Human beings are a disease, a cancer of this planet. You’re a plague and we are the cure. – The Matrix
I’m guessing we’re in decay…
@Ken Muldrew: The assertion that an economy must either be growing or decaying with only an unstable equilibium in between is news to me. I suspect that perhaps too little attention has been given to the problem if the only sustainable option is subsistence serfdom.
Our markets have evolved into a completely unsustainable form that are on the verge of taking the global economy down due to their voracious demand for ever increasing growth on ever decreasing time-scales. Clearly, this short-term downward spiral has to stop and stop soon.
I actually am a big fan of capitalism in the sense of pooling and directing resources in a way that promotes creativity, innovation, and the general welfare of humanity. However, we currently have a system that rewards destructive behavior and suppresses more healthy alternatives. A well crafted regulatory system would work wonders to put us on a more sustainable path, but as pdaly noted above our political class will fight tooth and nail to prevent it.
On a much more long-term time scale, we will eventually have to address equilibrium economic models. I suspect the current lack of such models, is due to the perception that growth will continue forever. Twenty-five years ago I had a conversation with a businessman that brought me up short. I was studying astronomy at the time and understood quiet clearly the finite nature of our lovely little planet. The businessman was explaining to me this whole idea that businesses must constantly grow to succeed. This stopped me short, because in my simplistic view of the world, I could imagine the restaurant in my small hometown serving the same number of people on a daily basis making a reasonable profit and providing a decent living to the owners and staff for decades. That is an equilibrium model, not a growth model. However, when I turned it around and asked the businessman, what happens when a business can no longer grow either because the population has stopped growing or the necessary resources have reached their limit, it was the businessman’s turn to be stopped short. His answer? “It won’t happen in our lifetime”. Undoubtedly true, but it will happen at some point. And then what? We will need new models for that. Someday perhaps, our economists will think about them.
“is due to the perception that growth will continue forever.”
I think the perception is that growth must continue short-term, and let the future take care of itself. It’s all about maximizing short-term profit — so CEOs get bonuses and politicians keep their jobs — and nothing about wisdom. Nuclear power plants, Monsanto, GM, the difference between Candidate and President Obama, everything Wall Street… China building that massive dam and screwing themselves… the Army Corps of Engineers here… stupid stupid stupid…
And “it won’t happen in our lifetime” — ? I think it’s happening now.
Also, this reminds me of a comment thread conversation back in one of bmaz’s trash talks, where I was introduced (hello!) to biophysical economics theory, intriguing but beyond me. I found the thread again this morning — cf person1597’s comments starting here, who quoted re magical debt vs. real wealth:
That’s Frederick Soddy, Nobel Prize for Chemistry in 1921.
More Soddy, from 1926 book Wealth, Virtual Wealth and Debt — the frame we need?
Soddy in my terms? The concept I haven’t seen really laid out, at my level — the one I look for in the “family budget” and checkbook analogies but don’t see — is double column accounting (is that the term?), where a debt in one column is exactly an asset in another. So the huger the debt, the huger the asset. So where are the assets now that the world is bankrupt, where’s that walnut shell? Mary said it perfectly @11: “the teeter is stuck in totter” — it’s not that so much is owed, it’s that wealth isn’t circulating — no dub for the lub — Ruskin’s terrible corruption — and that like Soddy says, “wealth” is debt untied to reality. Give a bank a real dollar and they fraud it into unlimited fantasy dollars of AAA-rated junk to be sold, compounded and bet against itself, with CEO bonuses paid up front annually calculated on the fantasy bottom line. They’re hooked on a mushroom cloud of casino fraud debt, and TBTF by definition can’t fail. Well really they can and have, there isn’t enough money in the world to float their boat, they’re just the last deck to sink. Or tranche. And when every living thing is dead, bfd, a corporation will still be the dead/undead person it’s always been.
Chetnolian actually had started the thread with musings on the phrase financial engineering, person1597 put that in terms of energy and oil cost efficiency theory, and I contributed some Brooks/Ruskin/Jefferson (David/John/Thomas):
Mishmash! But there it is, in the dump.
In sum, I guess I’d say we’re never gonna survive unless we get real and helpful to each other; i.e., all things that are crazy to corporate persons.
@thatvisionthing: “Give a bank a real dollar”. What, exactly, is a ‘real’ dollar?
Exactly. It’s one of those… those.
@thatvisionthing: Soddy’s distinction between wealth and debt may have been true at one time, but I don’t see the distinction now. For example, I may consider my wealth to include my investments, which have been assigned a mathematical value by Wall Street. But those numbers are meaningless until I try to sell those assets. In that sense it is not real physical wealth, but the same mathematical vapor-ware subject to the same peculiar and unpredictable social constructs as debt. I don’t have much confidence in the reality of any of it at this point, which is a problem since I need to rely on the accumulated wealth of my working years to support me in my retirement years. Given Wall Street’s habit of misrepresenting what they are selling, along with nearly 0% interest on my FDIC-insured savings account, I don’t expect to be able to count on much a decade or two from now when I will need it.
“Soddy’s distinction between wealth and debt may have been true at one time, but I don’t see the distinction now.”
I think that’s Ken Muldrew’s point — which one is real? It’s musical chairs, blindfolded. How many people, how many chairs — are there, were there ever, will there be any chairs?
I saw an illustration in Newsweek yonder decades ago — I wouldn’t even know how to search for it now — of a tree with a price tag on it. The price was sky. Now there’s your real wealth. If you turn that into dollars you’ll never be able to buy it back.
Tell that to a MOTU.
Maybe this comment will land, unnoticed, in the EPU, but here goes anyway: Isn’t your argument essentially based on entropy? Yeah, maybe you’re right, like in a million years, but by then there will be Earth Colonies on dozens of other planets.
Bob in AZ