Monday, March 24, 2014

A little bit more on Economic Growth

Just a bit of expansion on the Tinfoil Hat/Growth thing from the other day.

For companies, "growth" means that next year's profits must be bigger than this year's profits. This imperative drives all manner of commercial perversions, for instance, planned obsolescence. Also shoddiness.

Many Asian manufactured items are little more than pretend replicas. They consume energy and materials to create items that look real but are not fit for purpose. We are provided with screws whose heads give way as soon as any torque is applied to them. Cutting tools that cannot take and hold an edge.

British manufacturing would do well to look at producing durable if expensive quality gear that can be repaired instead of disposed of once wear has taken its toll.

Greens often rage against consumption. We must remember that consumption ranges from the necessary to the frivolous. As a doctor I can state with absolute confidence that consumption of food and water is vital for human life. Warm (but not overly warm) homes are also vital to life. All of these things require consumption. We cannot do without consumption.

After these life fundamentals, we need a variety of tools and instruments (in the widest sense, to include things such as transportation). Some tools are needed in order to support the vital primary level of function (Water, food, warmth, shelter and waste management) and some tools are in fact toys to play with - such as musical instruments. Play is a vital part of humanity.  We do need some of these, but at a reasonable level, not the tsunami of perishable goods ("stuff") that industry is throwing at us.

There is such a thing as natural greed and competitiveness, but many millions are spent each year on advertising to whip this human weakness up into a lather of desire. This advertising money is not committed by the advertisers just for fun. It is a serious propaganda effort to bend our minds to consuming the item advertised. It is good that we have policy to reduce advertising.

Now why is there a need for growth? Part of it, planned obsolescence, is easy to understand. My sister has a functioning, absolutely silent refrigerator that was built in the 1930s. I think it may be an "Einstein" fridge. If consumer goods were made to last like that, the market would become saturated, and manufacturers would drive themselves out of business. So things are designed to need replacement.

But why does the market have to grow? Hoogendijk (Willem Hoogendijk, "The Economic Revolution", Green Print/Jan van Arkel, London/Utrecht 1991) finds one answer in the creation of money through debt.

Hoogendijk says: Imagine two companies A and B, supplying the market with widgets. They are in balanced competition, each having half of the market. Now A takes out a loan, buys some machinery that drives his productivity up. He lays off workers, and soon has 75% of the market. B is therefore obliged to take out a loan to buy machinery and lay off workers. A and B are in balance again - but now they each have to service a debt, to pay interest. They are therefore obliged to expand into other markets. Debt interest obliges them to grow.

I would not like to say that debt interest is the only driver of growth, but it is a significant driver of economic growth, and it is good that Green Party policy does at last acknowledge this fact.

There are many other aspects to be considered, because economics is a system, and systems are neccessarily multifactorial.  As humans we tend always to oversimplify, but at the same time, it is necessary to hold on to those things that are certain.

Therefore I would like to reassert these certainties:

1) Throughput of carbon and materials is the No 1 economic problem that we face.
2) Growth of this system is the second problem, the icing on the cake as it were
3) In making the transition to a zero-throughput, cyclical economy that is structured as if people matter, we can promise something near full employment, and, paradoxically, marked economic growth of the green sector of the economy.
4) Full employment helps to reduces inequality, (since the gap in money and self-esteem between workers and unemployed disappears). This improves all manner of social problems.
5) Other measures (taxation of the super-rich) will further bring us towards more equitable distribution of wealth,  and that means a happier and more healthy society.
6) One possible, immediately practicable method of stimulating the green sector of the economy is the Green Wage Subsidy.

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