The Economics Of Enough

[sleepwello'nights]

I think you underestimate the implications of a zero growth paradigm- what it means in effect is that the entire idea of a better life in the future is gone.

So whatever you have now is all that you will ever have.

Surely there will be ups and downs for individuals within overall zero growth for the entire economy. Our entire lives follow a fairly predictable path: we are born, nurtured by our parents, reach maturity, reproduce, nurture our children, die.

Each stage demands a different call on the resources available, some stages require more consumption, some less. The present capitalist system encourages resources to be garnered measured in financial terms and retained by those successful or fortunate enough. Goverment through taxation seeks to redistribute in a fair way (subject to influences by special interest groups).

The problem we are facing is not lack of growth or lack of resources but financial resources being withheld by those in possession of them. Even if we had no more growth on an overall basis the normal ebb and flow of consumption by individuals at each stage of life would ensure that what you have now is not what you will ever have.

[winkie]

[wonderpup]

Surely there will be ups and downs for individuals within overall zero growth for the entire economy. Our entire lives follow a fairly predictable path: we are born, nurtured by our parents, reach maturity, reproduce, nurture our children, die.

Each stage demands a different call on the resources available, some stages require more consumption, some less. The present capitalist system encourages resources to be garnered measured in financial terms and retained by those successful or fortunate enough. Goverment through taxation seeks to redistribute in a fair way (subject to influences by special interest groups).

The problem we are facing is not lack of growth or lack of resources but financial resources being withheld by those in possession of them. Even if we had no more growth on an overall basis the normal ebb and flow of consumption by individuals at each stage of life would ensure that what you have now is not what you will ever have.

Yes at the margins some people would move down the income ladder and some move up- but the promise of capitalism is that there is room in future for more- of everything- zero growth denies this possibility.

In a zero growth economy social mobility would be much reduced- leading to a much more intense scrutiny of how that economy was sharing the wealth around.

I agree that the immediate problem is not resources but capital for investment- not that's there's a shortage of it, but that those who could make best use of it can't get it-while those who have it have built themselves a casino in which to play and see no need to dirty their hands by investing in the real economy.

Why risk investing in the real world when you can gamble in the markets instead while being backstopped by the taxpayer?

[goldbug9999]

. Even if we had no more growth on an overall basis the normal ebb and flow of consumption by individuals at each stage of life would ensure that what you have now is not what you will ever have.

Productivity is not a zero sum game so neither, therefore, is wealth (measured in "useful stuff" rather than money).

[Guest_GradualCringe_*]

Can you explain exactly what economic growth is and why it happens? Can we even say that it is positively correlated with technological advances? Demographic trends and efficiency increases would actually suggest to me that there should be an overall deflationary trend in the economy - so why isn't there?

Until these questions are answered, conclusions about growth, especially identifying it with a political 'side', are pointless.

Growth is the creation of better means of prodcuation (answer to questions 1 and 2).

We would see deflation if the supply of money remained static (question 3)

Governments (or other rent seekers) hinder the creation of better means of production by stealing savings from would be producers and more often than not spending it on consumption for special interest groups (bank bail outs being a prime example). Savings are required to invest in better means of production i.e. someone needs to suspend what they would doing ordinarily to provide for themselves whilst they create the new widget or process, and need to subsist either from their savings, or somebody else's (a loan or grant from a third party) during this time.

If there is no saving there can be no growth.

Edited May 5, 2013 by GradualCringe

[Guest_FaFa!_*]

A properly organised zero growth society is possible to imagine- but it would have to be based on very different principles than the one we have now- in such a society scarcity would be managed not traded because in a zero sum game distribution of resources becomes even more politicised than it is now- we could not fob off the losers with the idea that they will have jam tomorrow because they would know quite well that the amount of jam is a constant and their share of it will not be improved with time.

Is it possible to have a zero growth society? How do you measure zero growth?

Take Japan, zero growth in the aggregate but growth per capita over two decades. Zero growth due to population peak.

UK growing population, flat growth, so negative growth per capita?

And as population and resources decline, do we have negative growth rather than zero growth? Do we have stable or rising living standards if per capita productivity improves over a set time period? Will you see inflation as the savings amassed outweigh productivity gains and output?

[Goat]

I agree ......if we all worked less we could all share in the available resources.....have a more balanced work life relationship and time for freedom to explore our inner talents and gifts to share......but fear and sometimes greed hold back the abundance of future potential.....

The economy isn't a cake that we can just cut up and share out and the available resources are mostly other peoples time and effort. If we all worked less we would all be poorer.

[winkie]

The economy isn't a cake that we can just cut up and share out and the available resources are mostly other peoples time and effort. If we all worked less we would all be poorer.

....sure some would be poorer in the sense of how much money they earn, but many more would have access to work so would not need to make a claim on the state for top-ups.......but first the cost of living has to come down, mainly the cost of renting land.

[Traktion]

The economy isn't a cake that we can just cut up and share out and the available resources are mostly other peoples time and effort. If we all worked less we would all be poorer.

Were people poorer a few decades ago when only one parent in a family often worked?

Working more doesn't necessarily make you richer. If all of the extra money just goes to rent seekers, you just line someone else's pockets for your trouble.

[Traktion]

Growth is the creation of better means of prodcuation (answer to questions 1 and 2).

We would see deflation if the supply of money remained static (question 3)

Governments (or other rent seekers) hinder the creation of better means of production by stealing savings from would be producers and more often than not spending it on consumption for special interest groups (bank bail outs being a prime example). Savings are required to invest in better means of production i.e. someone needs to suspend what they would doing ordinarily to provide for themselves whilst they create the new widget or process, and need to subsist either from their savings, or somebody else's (a loan or grant from a third party) during this time.

If there is no saving there can be no growth.

I have sympathy with your answer, but I doubt this is how a government would measure growth. GDP is all about getting people borrowing and spending, with little regard about what it is spent on (ie. whether it improves efficiency or not isn't really considered).

Doing more with less would definitely seem like progress. I just don't think it is what the establishment would call 'growth'.

[Guest_GradualCringe_*]

I have sympathy with your answer, but I doubt this is how a government would measure growth. GDP is all about getting people borrowing and spending, with little regard about what it is spent on (ie. whether it improves efficiency or not isn't really considered).

Doing more with less would definitely seem like progress. I just don't think it is what the establishment would call 'growth'.

I believe the OP was asking for a definition of growth, rather than the government definition which as you say is a measure of activity i.e. provided headless chickens are running around in blind panic then the government is happy.

[South Lorne]

http://www.guardian.co.uk/business/economics-blog/2013/may/01/economics-of-enough

Abandoning growth...

How will we meet debt interest payments? This is a crazy idea, I want 6 TVs in my living room...

...yes ..but the problem is here .."The economic tools that have been applied – lower interest rates, quantitative easing, and strict austerity – are failing. GDP in the UK is now 2% lower than when the crisis began."..

GDP may be lower 'than when the crisis began' but that is an assumption against 'funny money' and the inflated mortgages with fake inflated equity withdrawals and subsequent spending of these beads from laughable valuations....get real..compare apples with apples ..not tinned sweetcorn....

[South Lorne]

http://www.guardian.co.uk/business/economics-blog/2013/may/01/economics-of-enough

Abandoning growth...

How will we meet debt interest payments? This is a crazy idea, I want 6 TVs in my living room...

...yes ..but the problem is here .."The economic tools that have been applied – lower interest rates, quantitative easing, and strict austerity – are failing. GDP in the UK is now 2% lower than when the crisis began."..

GDP may be lower 'than when the crisis began' but that is an assumption against 'funny money' and the inflated mortgages with fake inflated equity withdrawals and subsequent spending of these beads from laughable valuations....get real..compare apples with apples ..not tinned sweetcorn....

[silver surfer]

when you look at 300 year inlfation/deflation charts,it'd be interesting to see if a 6 year old could stick a pin in around the time they started chasing neverending growth.

I've going to the dentist this morning...I'm pretty glad that I don't live in the zero growth 1700's!

[wonderpup]

Is it possible to have a zero growth society? How do you measure zero growth?

Take Japan, zero growth in the aggregate but growth per capita over two decades. Zero growth due to population peak.

UK growing population, flat growth, so negative growth per capita?

And as population and resources decline, do we have negative growth rather than zero growth? Do we have stable or rising living standards if per capita productivity improves over a set time period? Will you see inflation as the savings amassed outweigh productivity gains and output?

Ironically the one area where zero growth can be easily measured and defined is that of Debt- the limit we seem to be running into is not that of resource depletion but of debt carrying capacity- we are being undone by a pure abstraction.

Will our descendants think of us as insane that we allowed our societies to fall into chaos and despair simply due to an accounting problem?

After all the debt that is crushing us has called into being an equal weight of wealth- yet somehow we seem unable to mobilise the latter to deal with the former.

We are victims of a system we ourselves have devised and seem unable to modify.

Edited May 7, 2013 by wonderpup

[scepticus]

Ironically the one area where zero growth can be easily measured and defined is that of Debt- the limit we seem to be running into is not that of resource depletion but of debt carrying capacity- we are being undone by a pure abstraction.

No, its not an abstraction. If free energy flux into advanced economies was growing strongly we'd easily create more population, more real estate assets and more debt and be able to service the new debt load.

Because we are not doing any of those things, we have peak debt.

Its a leftist fantasy that we are 'constrained by debt', and its a right wing fantay we are 'constrained by government'.

We are in fact constrained by the first and second laws of thermodynamics. The debt dynamics follow from that.

Edited May 7, 2013 by scepticus

[sammysnake]

I think you underestimate the implications of a zero growth paradigm- what it means in effect is that the entire idea of a better life in the future is gone.

So whatever you have now is all that you will ever have.

This means that-generally speaking- social inequality will be fixed for all time- which means that people would be far more concerned with what they are getting right now because they will know that's all they will ever have in the future.

So the issue of who gets to have what slice of the fixed sized pie will be far more politicised even that it is today. The idea of a better tomorrow is deeply embedded in our culture- if that goes away you must suspect that the fight over who gets what will intensify.

So I would argue that a zero growth society would find free market capitalism deeply problematic since it derives it's dynamic from the inequity of outcomes + the promise that anyone can better their lot in the future if they work hard enough.

But in a zero sum game I can only get more if you get less- in such a constrained scenario capitalism looks less like freedom and more like a tool to legitimise the unfair distribution of fixed resources- and so It would lose popular support.

Capitalism without growth is socialism- if by socialism you mean a regime in which a favoured group has special access to resources denied to others- after all social mobility implies that there is 'room at the top'- but in a system without growth there is no room at the top- nor will there ever be.

So the rich in a zero growth capitalist system become as entrenched as any soviet ruling party member.

Nice one Wonderpup, that is very informative stuff!

[wonderpup]

No, its not an abstraction. If free energy flux into advanced economies was growing strongly we'd easily create more population, more real estate assets and more debt and be able to service the new debt load.

Because we are not doing any of those things, we have peak debt.

Its a leftist fantasy that we are 'constrained by debt', and its a right wing fantay we are 'constrained by government'.

We are in fact constrained by the first and second laws of thermodynamics. The debt dynamics follow from that.

If all the debt on the planet were abolished in the morning the amount of energy and resources available to us would remain unchanged- so in that sense debt is entirely an abstraction.

Peak debt = Peak wealth- so is our problem too much debt, or is it simply that the wealth called into being by that debt is not being utilised in a productive fashion?

It seems the elites have encumbered the system with debt while hiding the resulting wealth offshore instead of using it to finance the productive activity required to pay that debt down.

They have siphoned out the petrol and now try to kickstart the engine.

[scepticus]

If all the debt on the planet were abolished in the morning the amount of energy and resources available to us would remain unchanged- so in that sense debt is entirely an abstraction.

wrong, because the means of extracting that energy would also collapse. The debt superstructure is directly correlated with the means of production. The debt structure, the system of social obligation is the sinew of social fabric, the reason why people get out of bed every day. It may not be fair but without we are most of us dead.

Peak debt = Peak wealth- so is our problem too much debt, or is it simply that the wealth called into being by that debt is not being utilised in a productive fashion?

Peak debt simply means that we can't by means of social-economic activity produce more net free energy in this country. That cannot be fixed by austerity, labour-style Keynesianism or pandering to save-our-savers. Wealth can only be measured as energy consumed by people and their attendant machines.

It seems the elites have encumbered the system with debt while hiding the resulting wealth offshore instead of using it to finance the productive activity required to pay that debt down.

Nonsense. The system is encumbered with debt because that is the natural state of the system under steady conditions. That was the natural state of the system - peak debt- during the high middle ages for the same reason we have peak debt now. The existence of iPads and democracy doesn't change the essential underlying socio-economic equation one little bit.